Markets Watch

Corporate earnings, geopolitical events likely to affect market

Local bourse to take cue from Wall Street this week, with focus on Biden inauguration

Ongoing preparations for President-elect Joe Biden's inauguration at the Capitol in Washington on Wednesday. Mr Biden has plans for a US$1.9 trillion (S$2.5 trillion) stimulus package for the US economy.PHOTO: AGENCE FRANCE-PRESSE

If there was one feature that marked trading over the past week, it was volatility. And this kind of choppy and volatile trading is likely to continue this week.

Despite being buffeted by crosswinds of corporate and geopolitical news, the Singapore market's benchmark Straits Times Index ended the week at 3,004.87, a level not seen since March 5 last year.

One stock that stood out was Wilmar International, whose gains were also helped by a Maybank Kim Eng report that raised its target price to $6.80, citing record soya-bean-crushing margins, normalisation post-Covid-19 activities in China and rising palm oil prices, among others.

In a further sign that dividend payouts may remain depressed for a while, SPH Reit declared a first-quarter distribution per unit (DPU) of 1.2 cents, down from 1.38 cents in the year-ago period. Down by 13 per cent year on year, the lower DPU was "in line with the gradual Covid-19 recovery in both Singapore and Australia", the manager said in an interim business update last Wednesday.

This came even as gross revenue rose by 10.8 per cent year on year to $66.6 million, for the three months to Nov 30. Reit turnover was shored up by South Australia's Westfield Marion, which was acquired in December 2019, as well as stable contributions from Figtree Grove in New South Wales.

Given that the Singapore market is seen as a dependable yield play and key investment target for many retail investors here, many will likely be watching closely to see what kind of dividend payouts other S-Reits declare in the weeks ahead.

According to the Singapore Exchange, the combined market capitalisation of the S-Reit sector stood at $107 billion at the end of last year, a 12 per cent rise from 2019. And the sector raised $4.5 billion in secondary fund raisings and was the recipient of $1.2 billion in net retail inflows last year.

The two big events that the market watched closely during the past week was the second impeachment of United States President Donald Trump and a steepening of the Treasury yield curve.

Going into this week, corporate earnings and geopolitical events are likely to weigh on the market. Among the notable results coming in the days ahead are ESR-Reit and Frasers Centrepoint Trust.

But the biggest event of this week will be the swearing-in of Mr Joe Biden as the 46th US President on Wednesday.

The benchmark Dow Jones index slipped 0.57 per cent to 30,814.26 last Friday, while the broader S&P gave up 0.72 per cent to 3,768.25. But given that historically, markets have always risen during the first year of a new presidency, most experts think the upside remains intact.

Mr Biden has already announced plans to roll out a US$1.9 trillion (S$2.5 trillion) stimulus package as a first line of relief for the Covid-19-stricken US economy. This could underpin the bullishness.

But some within the market are concerned about the steepening Treasury yield curve, signalling potentially rising interest rates.

But Federal Reserve chairman Jerome Powell has again indicated that the central bank has no intention of tapering its balance sheet expansion.

As during the past week, situational plays and value stocks should continue to be in focus this week. The local market will also take its cue from New York.

A version of this article appeared in the print edition of The Straits Times on January 18, 2021, with the headline 'Corporate earnings, geopolitical events likely to affect market '. Subscribe