Bulls And Bears

Blue-chip rally lifts STI by 1.6%

TPP trade deal and hopes of more monetary easing keep bourses across Asia buoyant

Two pieces of news from abroad helped fuel an extended rally yesterday in bourses across Asia, including Singapore.

The first was hopes of more monetary easing after last Friday's disappointing US jobs data. The second was a historic Pacific-wide free trade accord reached yesterday.

A rally in blue chips lifted the benchmark Straits Times Index 1.62 per cent or 46.16 points to 2,897.41.

Singtel jumped 2.7 per cent or 10 cents to $3.76; DBS Group Holdings gained 2.5 per cent or 41 cents to $16.92 and OCBC rose 1.2 per cent or 11 cents to $9.06. Global Logistic Properties jumped 3.8 per cent or eight cents to $2.17.

"The main driver for the extended rally seemed to be hopes that we might see more monetary easing in the pipeline," IG market strategist Bernard Aw said. "Even so, you can't print your way out of the economic slowdown. More quantitative easing (if it happens) will be a negative signal that global economic activity still cannot stand on its own feet."

Singapore and Indonesia have been among the strongest performers so far this week, rallying about 3 per cent and 5 per cent respectively.

"The outsized gains may be due to their stock indexes being one of the most sold off recently. The STI slumped 15.9 per cent in the third quarter, while Jakarta Composite tumbled 14 per cent," Mr Aw said.

Remisier Desmond Leong expects volatility to increase when Chinese markets reopen tomorrow after Golden Week. "If the STI can stay above key support of 2,750, then it's good. But if it breaks, then we are back on a downtrend."

News that Malaysia is slashing crude palm oil (CPO) imports to manage its stock levels sent shares of Golden Agri-Resources jumping 8.6 per cent or three cents to 38 cents, with 47.5 million shares traded.

Plantation Industries and Commodities Minister Amar Douglas Uggah Embas was cited in the media as saying the move to cut imports was among measures to keep stocks at a "comfortable level" of about two million tonnes. He said the government was also taking other measures to manage the CPO stock, including increasing biodiesel consumption and implementing a replanting incentive scheme effective Oct 1.

Meanwhile, news that the US, Japan and 10 other Pacific Rim countries had reached a deal on the Trans-Pacific Partnership (TPP) also boosted sentiment. If successfully ratified by each of the 12 TPP partners, it will be the biggest trade accord in more than 20 years, covering about 40 per cent of world GDP. However, optimism may be tempered by the fact that the deal still needs final approval from US Congress, and faces a long ratification process.

"For a start, there are several hurdles to overcome before it is implemented. After all, the last three US trade agreements were implemented only four to six years after they were signed," Capital Economics senior global economist Andrew Kenningham pointed out.

A version of this article appeared in the print edition of The Straits Times on October 07, 2015, with the headline 'Blue-chip rally lifts STI by 1.6%'. Print Edition | Subscribe