Markets insight

Experts split over outlook for earnings season

Residential buildings in the Nanshan district of Shenzhen, China. According to Reuters calculations from official data out on Saturday, average new home prices across China rose 0.4 per cent last month from May, a stronger gain that the 0.2 per cent
Residential buildings in the Nanshan district of Shenzhen, China. According to Reuters calculations from official data out on Saturday, average new home prices across China rose 0.4 per cent last month from May, a stronger gain that the 0.2 per cent rise in May.PHOTO: BLOOMBERG

Questions remain ahead of expected release of June industrial production data on Friday

Second-quarter corporate earnings at home are set to grab the attention of investors in the coming weeks as fears of Greece's exit from the euro recede and China's equity rout appears to be levelling off.

Analysts are divided on their outlook for this earnings season, as they are split on whether the local economy has turned the corner.

According to the latest official advance estimates, Singapore's economic output shrank 4.6 per cent in the second quarter over the previous quarter. But June's non-oil domestic exports (Nodx) data, which posted a surprise gain of 4.7 per cent year on year compared with a 0.3 per cent decline in May, could lead to a lift in the final second-quarter economic growth reading, depending on how strong last month's industrial production was, economists said.

Singapore's June industrial production data is due on Friday.

Some traders are watching the second-quarter CapitaLand Commercial Trust results, due out before the start of trading on Friday, and those for CapitaLand Mall Trust, due out before 8am on Wednesday, for clues on the health of local office and retail markets.

Meanwhile, news last Friday that China has made up to 3 trillion yuan (S$661 billion) of funding available to government agency China Securities Finance Corp should help stabilise regional bourses.

A recovery in Chinese home prices for a second straight month may give a fillip to CapitaLand, which has exposure in China, analysts said. Average new home prices across China rose 0.4 per cent last month from May, according to Reuters calculations from official data out on Saturday. That was a stronger gain than the 0.2 per cent rise in May, the first monthly increase since April last year.

This is seen as a sign of bottoming out for one of China's key sectors and should ease fears of a sharp economic slowdown. Traders are also looking for signs of the health of the global economy from purchasing managers' index (PMI) factory data from China, Germany, France and the United States, all due on Friday.

"Flash HSBC PMI manufacturing data for China should give us further clues on whether the government will introduce more stimulus measures," said CMC Markets analyst Nicholas Teo.

"If manufacturing activity is expanding in all those countries, that will show the global economy is recovering, which should have a positive impact on our market," he said.

Reports saying state investment firm Temasek Holdings has put Neptune Orient Lines (NOL) up for sale may fan tailwinds for the struggling container shipping firm this week. The stock closed on Thursday at 87.5 cents, up 0.6 per cent, or 0.5 cent, on 4.23 million shares traded.

The potential sale of the entire company was made easier when NOL, 65 per cent owned by Temasek, announced earlier this year the sale of its logistics business, APL Logistics, for US$1.2 billion (S$1.6 billion) to Japan's Kintetsu World Express. "Temasek may be trying to sell NOL to free up capital to acquire assets with more aggressive returns," Mr Teo said.

A version of this article appeared in the print edition of The Straits Times on July 20, 2015, with the headline 'Experts split over outlook for earnings season'. Print Edition | Subscribe