Markets Insight

Market at inflexion point after strong run

What a difference a year makes.

At this time last year, the local stock market was limping into results season, with the Straits Times Index (STI) ravaged by a fall of more than 10 per cent.

But the Singapore benchmark has been buoyant this year. With a year-to-date rise of 7.9 per cent - including last week's 0.23 per cent gain to 3,107.65 - the STI has been one of Asia's top performers, over Sydney's 2.5 per cent gain and not far behind Hong Kong's 9.2 per cent rise.

Local sentiment has been lifted by Wall Street optimism over potential stimulus plans from the Trump administration while rate-hike expectations are driving up global banking stocks.

But signs that Singapore's economy is slowly turning around have also helped. After last year's full-year growth came in at a better-than-estimated 2 per cent, manufacturing figures out this Friday will likely be encouraging too.

BOOST FROM BUDGET 2017?

Some easing of cooling measures will definitely give the market a bounce. Otherwise, we're still looking at a resistance level of 3,100 (for STI).

REMISIER ALVIN YONG

"We expect Singapore's industrial production growth to have slowed to 15 per cent year on year in January, down from December's astronomical 21.3 per cent. Nevertheless, the trend remains strong, as Singapore's manufacturers have benefited from stronger demand and an upswing in the global tech cycle," Moody's Analytics said.

But the main event this week is, of course, Budget 2017 which will be unveiled today.

Previous Budget announcements had not moved the markets much. But investors will certainly cheer moves to stimulate growth or ease property cooling measures, market watchers said.

"I don't really expect the Government to do so but some easing of cooling measures will definitely give the market a bounce. Otherwise, we're still looking at a resistance level of 3,100 (for STI)," remisier Alvin Yong said.

KGI Securities Singapore trading strategist Nicholas Teo said: "Guessing the Budget's impact is a jab in the dark. For instance, there're rumours that the new Budget will bring restrictions on Uber. Does that mean a boost to companies like ComfortDelGro? There's no way to tell."

Expectations that private-hire players such as Uber and Grab may soon be barred from bidding directly for Certificates of Entitlement (COEs) had emerged last week, after the Land Transport Authority said the next COE tender will be delayed by two days.

"On the other hand, if the Budget disappoints, will the market come off from the previously priced-in optimism? That's the inflexion point we're at now, with company results, United States President Trump and the Federal Reserve meeting all coming into play," Mr Teo added.

The ongoing results season has been a mixed bag, with numbers that confirmed market fears - such as Keppel Corp's fourth-quarter impairment provisions of $313 million - while companies like CapitaLand impressed with robust growth.

But many other businesses have struggled to even stay in the black. Just last week, companies such as Ezion Holdings, Charisma Energy, Anchor Resources, Top Global and Rowsley issued loss warnings.

It would seem that, beneath the buoyant stock market, the corporate sector is hardly out of the woods yet.

Wong Wei Han

A version of this article appeared in the print edition of The Straits Times on February 20, 2017, with the headline 'Market at inflexion point after strong run '. Print Edition | Subscribe