Markets Insight

Muted trading expected in Asian markets this week

Visitors to the Lincoln Memorial in Washington on Saturday. A partial US government shutdown is set to drag through the Christmas holiday after an impasse over President Donald Trump's demand for more funds for a border wall. The political turmoil ad
Visitors to the Lincoln Memorial in Washington on Saturday. A partial US government shutdown is set to drag through the Christmas holiday after an impasse over President Donald Trump's demand for more funds for a border wall. The political turmoil added to fears about the economy that are plaguing investor sentiment, helping fuel continued heavy losses in the stock market on Friday.PHOTO: BLOOMBERG

Concerns over global growth, political risks in US and elsewhere dampen holiday spirit

Markets in Singapore and across most of Asia look set for quiet trading this week as worries continue to mute investors' appetites for eating, drinking and merrymaking.

Concerns over slowing economic growth and a government shutdown sent Wall Street stocks spiralling down last Friday. Furthermore, US President Donald Trump has warned that the current government shutdown could be lengthy while he continues negotiating with Congress for funds to build his border fence.

White House trade adviser Peter Navarro had also said the US and China might not reach a trade deal at the close of a 90-day negotiating window unless Beijing can agree to a profound overhaul of its economic policies, accelerating declines in US stock indexes. The Nasdaq confirmed it is in a bear market, with technology and communication services stocks taking most of the hit from the sell-off.

"It's a convergence of various factors - from global growth to quantitative tightening concerns, as well as political risk in the US and across the globe," Mr Chad Morganlander, portfolio manager at Washington Crossing Advisors, told Bloomberg.

"It's like 'Wow, man'. It's unbelievable - it's the polar opposite of what you had in 2017. Investors don't necessarily need to dive into the pool until you see some of these various issues subside."

Singapore could see technology stocks - such as Venture Corp, Valuetronics Holdings and UMS Holdings - weighed down too. Analysts are largely neutral on the sector for next year, as margin pressures induced by trade tensions and volatile exchange rates pose recurring risks, among other factors. According to RHB Research Institute data, the Straits Times Index's technology sector has delivered negative returns in the year to date. In Singapore dollar terms, sector performance has dropped 25 per cent.

Falling oil prices could also pose key overhangs on commodities and offshore marine sectors. Oil prices fell last Friday to their lowest since the third quarter of last year, amid a supply glut and global growth fears. Counters like Sembcorp Marine and Sembcorp Industries are near their yearly lows. In addition, RHB data showed the commodities sector's performance has been flat in the year to date.

Trading is also likely to thin as most Asian markets, including Singapore, will be closed on Christmas Day. The holiday will also be observed in most major developed markets, except Japan.

Heading into the last week of the year, the data docket is light.

Key data releases for Singapore will include the November consumer price index, or headline inflation, today. UOB Global Economics and Markets Research is expecting November headline inflation to come in at 0.7 per cent year on year, and core inflation at 2 per cent year on year.

November industrial production figures are expected on Wednesday, with UOB estimating a 2 per cent year-on-year decline.

Elsewhere in Asia, the Bank of Japan will release its minutes on Wednesday, along with a speech by the central bank's governor Haruhiko Kuroda.

The central bank recently kept interest rate targets unchanged but has signalled that stimulus could be ramped up as the economic outlook turns cloudy.

China will release industrial profit data on Thursday, which will be closely watched by economists and market analysts as the country manoeuvres a slowing economic growth engine and tackles tricky trade relations with the US.

A version of this article appeared in the print edition of The Straits Times on December 24, 2018, with the headline 'Muted trading expected in Asian markets this week'. Print Edition | Subscribe