Wall Street's rally last Friday following a bumper November jobs report is expected to give a much needed tailwind to Singapore stocks at the start of the trading week.
The Dow Jones Industrial Average surged 2.1 per cent, its biggest increase since early September, after the US Labour Department said non-farm payrolls increased by 211,000 jobs last month, beating expectations for 200,000 jobs.
The stronger-than-expected jobs report may remove any lingering doubts over whether the economy is robust enough for the Federal Reserve to start raising interest rates at its next meeting, taking place next week.
However, market participants believe the pace of rate increases will likely be slow because of anaemic global growth.
Schroders Investment Management said in a recent report that the first rate hike is "not likely to be followed by an aggressive tightening cycle" due to soft US exports and weak Chinese growth.
Remisier Alvin Yong said: "The big question now is how big the initial rate hike will be. Anything less than 25 basis points may be cause for a rally."
Rate-sensitive bank counters here in Singapore are expected to do well ahead of the looming rate hike as lenders will be able to charge borrowers more while earning more on reserves.
RHB, which maintained an overweight call on Singapore banks, said they "stand out for their asset-quality resilience and well-capitalised balance sheets".
"DBS is our top pick, as it has the smallest exposure among Asean peers and offers the best leverage to the US rate cycle," RHB said. "OCBC remains a buy as proactive restructuring of commodities-related loans would keep credit cost in check."
The brokerage maintained a neutral call on United Overseas Bank, given its higher exposure to the slowing region and the sluggish local property market.
Investors will also be watching for China's November export and import data, to be released tomorrow, for indications on global demand and the health of the world's second-largest economy.
Meanwhile, Neptune Orient Lines will likely be hotly traded as CMA CGM, the world's third-largest carrier, is expected to complete due diligence on the shipping line and negotiate a definitive offer by 11.59pm today.
Amid uncertainty over whether the multibillion-dollar deal can be pulled off, Reuters last week cited sources saying the French shipping giant has obtained firm commitments from banks to finance the takeover.
Ratings agency Fitch, in a report last week, warned that overcapacity, lower economic growth and weak commodity prices would create a challenging environment for Asian shipping companies in the medium term. Smaller shipping companies are likely to be among the most at risk, and consolidation is likely among larger ones, it said.