Expect more volatility - and also opportunity

Looking into the week ahead and even into next month, investors should brace themselves for the possibility of more market volatility.
Looking into the week ahead and even into next month, investors should brace themselves for the possibility of more market volatility.PHOTO: ST FILE

SINGAPORE - If there is one thing that is a constant for equity markets, it is turbulence and volatility. And that proved true last week as key stock indexes bounced between record highs and month lows as sentiment swung between greed and fear.

Reports that the Biden administration was proposing a capital gains tax to fund its expensive fiscal and reconstruction agenda sent Wall Street stocks plunging on Thursday to their lowest levels in weeks, only to quickly bounce back the next day.

The Dow Jones index rose 227.59 points to close the week at 34,043.49, while the broader S&P index gained 45.19 points to 4,180.17. The tech-heavy Nasdaq rose 198.39 points to 14,016.81.

The Straits Times Index posted a slight 6.26 point gain to 3,194.04. But for the week, the Singapore benchmark was down 7.72 points as sentiment was dampened somewhat by concerns over a resurgence of Covid-19 community cases here.

Record daily highs in new global Covid-19 cases are sending jitters through markets.

But every challenge also presents opportunities.

Singapore's most traded pure-play medical suppliers and distributors ended the week on a high note.

Stocks like Top Glove, Medtecs International, Riverstone Holdings and UG Healthcare chalked up average gains of 4.8 per cent last Friday, further extending their average monthly gain to 21.8 per cent.

With just one week of trading remaining this month, the current 21.7 per cent month-to-date gain by Top Glove is the strongest monthly rise that the stock has seen since its 60 per cent share price surge in July last year.

Likewise, the current 19.4 per cent month-to-date gain by Medtecs International is the strongest monthly surge for the stock since its 69 per cent leap in August last year.

The recovery in the property sector is also providing buoyancy for property stocks like PropNex, APAC Realty and OUE.

OUE, which reports 83 per cent of its revenue in Singapore, has rallied almost 17 per cent from $1.25 to $1.46.

On the broader front, there was no discernible nervousness in the market over the Singapore Cabinet reshuffle, which was announced late on Friday. This is perhaps testament to the perceived strength and calibre of the Government, and the belief that Singapore will continue to remain stable and maintain its role in global financial markets no matter who emerges as first among equals in the current fourth-generation leadership team.

Looking into the week ahead and even into next month, investors should brace themselves for the possibility of more market volatility. After all, we are only days away from the onset of May, and the old adage "sell in May and go away" could play on investors' minds.

Mr Vasu Menon, executive director for investment strategy at OCBC Bank, reckons that given the exceptional market rally so far and with a lot of the good news already known, it will be harder for upcoming data and events to keep on surprising on the upside.

"The road to normality will be a bumpy one and with inflation rates poised to rise further, markets will worry if central banks can continue to keep monetary policy loose much longer," he pointed out.

Still, most analysts expect the United States Federal Reserve to stay the course with its accommodation stance when it meets tomorrow and the day after, given that the US Treasury yield curve has not steepened further since the central bank's last gathering.

The week ahead will also see US first-quarter gross domestic product numbers and personal expenditure data. It will be a big earnings week on Wall Street, with tech giants Facebook, Apple, Amazon, Alphabet, Microsoft and one-third of S&P component companies releasing financial results.

China will unveil its purchasing managers' gauge for this month.

In Singapore, notable results this week include those of Mapletree Commercial Trust, Mapletree Industrial Trust, Wilmar, DBS Group and Frasers Hospitality Trust.

Expect volatility, but volatility and weakness also present opportunity.