Markets Insights

Earnings, key S'pore data to set direction of trading

A production line for mobile phone camera lenses at a factory in Lianyungang, Jiangsu province. China's industrial production and retail sales data for July are due out this week. The figures could "influence broader sentiment surrounding Asian asset
A production line for mobile phone camera lenses at a factory in Lianyungang, Jiangsu province. China's industrial production and retail sales data for July are due out this week. The figures could "influence broader sentiment surrounding Asian assets", says an FXTM analyst.PHOTO: REUTERS

Eye on Q2 GDP, July trade figures; some firms see quarterly losses due to challenging times

It promises to be a quieter week on the markets but stocks may still face volatility amid a lacklustre earnings season, and with growth worries returning to the forefront.

The Straits Times Index was dragged down before the long weekend by some large caps that posted disappointing earnings results.

Companies such as Best World and Chaswood Resources Holdings post quarterly results this week.

Best World's announcement will come amid an investigation by the Singapore Exchange's regulatory arm into the skincare seller's business dealings. This was triggered after the firm confirmed on May 13 that its biggest customer, Changsha Best, was owned by the brother-in-law of chief executive Dora Hoan. Other links between the two firms were also revealed.

Chaswood Resources warned of half-year losses last week, citing lower revenue amid challenging market conditions. The announcement added to the growing number of companies expecting to post losses.

Mainboard-listed Hiap Seng Engineering said last Friday it expects to record a first-quarter net loss. Further details will be disclosed when it releases its results this week.

Also, some key economic reports will be out this week, with the final number on Singapore's second-quarter gross domestic product due tomorrow, followed by July's external trade data on Friday.

Market watchers will look to those figures to set the tone for Singapore's economic outlook for the second half of the year, especially in the wake of aggressive moves by Asia-Pacific central banks.

Last week, the Reserve Bank of New Zealand made a greater-than-expected cut, while the Bank of Thailand's move to lower its benchmark interest rate for the first time since 2015 took investors by surprise, bringing fears over slowing growth back to the fore.

China's July industrial production and retail sales data are due out. The numbers could "influence broader sentiment surrounding Asian assets, given the region's reliance on China", said an FXTM analyst.

"Further signs of firming in the Chinese economy should shore up risk sentiment over the near term, aided by the People's Bank of China's injected stability in the onshore yuan," he added.

Citi economists tip China's industrial production growth to come in at 6 per cent year on year with retail sales up 8.8 per cent.

Economic indicators in the United States like inflation, retail sales and industrial production data will also be released in the week ahead. But it is the potential implication for monetary policy that analysts will be watching.

"Should the data point to economic resilience, that may nudge (the) Fed away from more rate cuts while allowing the dollar to edge higher," said the FXTM analyst.

But US policymakers may have "found enough justification in the heightened US-China conflict to ease its policy settings again next month, with markets currently expecting a 63.7 per cent chance of another 25-basis-point cut in September", he added.

A version of this article appeared in the print edition of The Straits Times on August 12, 2019, with the headline 'Earnings, key S'pore data to set direction of trading'. Print Edition | Subscribe