Markets Insights

Corporate earnings to remain focus

An employee working on rebars at a factory in Hangzhou, China. The Caixin services purchasing managers' index for July, which focuses more on smaller and medium-sized companies, is out today. PHOTO: AGENCE FRANCE-PRESSE
An employee working on rebars at a factory in Hangzhou, China. The Caixin services purchasing managers' index for July, which focuses more on smaller and medium-sized companies, is out today. PHOTO: AGENCE FRANCE-PRESSE

4 more STI component firms to post results this week; all eyes on Asia-Pac central bank meetings, China data

In the local market, the corporate earnings season will continue to hog the limelight this week, with data releases in the periphery.

Singapore's Straits Times Index (STI) ended last Friday at 3,261.11, down 30.64 points, or 0.9 per cent, and shedding 102.65 points, or 3.05 per cent, over the past week.

Much of the benchmark index's performance last week was down due to profits being booked ahead of the United States Federal Reserve's rate cut decision, which saw the STI dip 1.5 per cent on Wednesday.

Thursday and Friday saw the STI post further losses as investors globally took Fed chairman Jerome Powell's statement following the quarter-point cut as hawkish, as well as US President Donald Trump's move to slap another 10 per cent tariff on US$300 billion (S$413 billion) worth of Chinese goods from Sept 1.

With this latest salvo, essentially all Chinese exports to the US will face import duties.

Most STI components have already reported earnings for the April to June period. That said, this week will see four more companies post earnings, starting with Yangzijiang Shipbuilding on Wednesday.

On Thursday, Singtel, Venture Corporation and City Developments will report earnings, ahead of the National Day break on Friday.

The Singapore economic docket is fairly empty, with just July's Nikkei purchasing managers' index (PMI) figures today and retail sales for June on Thursday.

With August a traditionally weak month for the STI, DBS Equity Research expects the blue-chip index to trade in the 3,245 to 3,275 range.

"We observed that the Singapore market tends to peak in late July, falling through August before bottoming in early September," DBS analysts Yeo Kee Yan and Janice Chua said.

The bank has adopted a risk-off stance for this month, preferring stocks with high dividend yield and earnings visibility, such as ST Engineering, Sheng Siong and Koufu.

With growth uncertainty, the US-China trade escalation and global dovish actions by central banks, Standard Chartered Bank economists are of the view that such conditions may prompt the Monetary Authority of Singapore to ease its monetary policy in October.

"We expect the central bank to ease the Singapore dollar nominal effective exchange rate (S$NEER) band slope slightly by 50 basis points to plus 0.5 per cent a year. We do not expect the Monetary Authority of Singapore to adjust the centre or width of the S$NEER policy band," said StanChart.

Asian investors will also be looking to China's monthly data dump. The Caixin services PMI for July, which focuses more on smaller and medium-sized firms, is out today.

The private sector reading for manufacturing released last Thursday beat street expectations, though it remained in contraction territory. China's trade data for July will be released on Thursday, as will the inflation data on Friday.

Elsewhere in the Asia-Pacific, central banks in Australia, India, New Zealand, the Philippines and Thailand have policy meetings this week.

Among other economic data releases this week, there will be some focus on the Philippines and Taiwan. Both will release July's inflation data tomorrow and trade data on Wednesday.

The Philippines will report second-quarter gross domestic product figures on Thursday.

Meanwhile, Malaysia and India will release industrial production figures for June on Friday.

A version of this article appeared in the print edition of The Straits Times on August 05, 2019, with the headline 'Corporate earnings to remain focus'. Print Edition | Subscribe