Markets Insights

No signs of January spurt slowing

The Singapore bourse's key Straits Times Index (STI) is up a stellar 3.5 per cent so far this year at 3,520.56, posting gains for six out of nine trading days in the new year.
The Singapore bourse's key Straits Times Index (STI) is up a stellar 3.5 per cent so far this year at 3,520.56, posting gains for six out of nine trading days in the new year.PHOTO: ST FILE

Prospect of rosy global growth has fuelled rally in markets; STI up 3.5% so far this year

IT may be too early to trot out the stock market cliche "as goes January, so goes the year". But there is no denying the exuberance.

The market has started the year with a bang and while there are still two weeks left to go before February, one would be hard-pressed to find reasons to deflate the air of optimism among investors.

The prospect of rosy global economic growth has fuelled a rally in the world's financial markets and it is no different at home.

The Singapore bourse's key Straits Times Index (STI) is up a stellar 3.5 per cent so far this year at 3,520.56, posting gains for six out of nine trading days in the new year.

Going by Wall Street's record showing last Friday as the fourth-quarter earnings season got underway, there are few reasons to hold back Singapore stock prices from powering on.

The technical charts on the STI paint a bullish medium-term picture. Chartists say the next resistance level is 3,547 - a high that was last seen in April 2015.

In the United States, all three major indices rose to record levels, with the Dow Jones Industrial Average up 0.9 per cent, and the S&P 500 and tech-rich Nasdaq each rising nearly 0.7 per cent last Friday.

IMPORT DEMAND REMAINS FIRM

We expect (Singapore's) Nodx to have continued to grow in December, but the momentum should have slowed down. Import demand from major trading partners ... remains firm.

HSBC GLOBAL RESEARCH, adding that it expects export expansion to continue to drive GDP growth.

Several factors have propelled the surge - expectations that the US tax overhaul will help lift corporate profits that are already at strong levels even without the upcoming tax booster.

Market watchers will be keeping an eye on corporate earnings this week while digesting the slew of macroeconomic data from the world's largest economy.

Underlying US consumer prices saw their biggest jump in 11 months in December.

The latest data has prompted market watchers to reiterate that the US central bank will hike its benchmark interest rate three times this year after making similar hikes last year.

Solid retail sales data spurred by holiday spending released last Friday further affirmed positive sentiments towards the US economy.

For this week, the data docket is relatively sparse while the US stock market is closed today for a public holiday.

Significantly, the last of China's economic data for 2017 is due. Moody's Analytics expects China's fourth-quarter gross domestic product (GDP) growth to hit 6.8 per cent year on year, unchanged from the third quarter's pace; this would bring full-year GDP growth to 6.85 per cent in 2017.

While the ongoing reform drive has been slowing down domestic demand - the crackdown on pollution and the drive to bring debt under control are starting to weigh on parts of the economy - China's overall economic growth has likely remained resilient in the fourth quarter of 2017, said Julius Baer economist Susan Joho.

Looking ahead, she expects a mild cooling of overall economic growth for the first quarter of 2018 after a relatively strong 2017 for the world's second largest economy.

Britain will update markets with inflation, retail sales and a string of other data, while Singapore's non-oil domestic exports (Nodx) data will be released on Wednesday.

Said HSBC Global Research: "We expect (Singapore's) Nodx to have continued to grow in December, but the momentum should have slowed down. Import demand from major trading partners such as South Korea and China remains firm.

"Industrial production in Q4 continued to expand, albeit at a slower pace."

The house expects export expansion to continue to drive GDP growth.

A version of this article appeared in the print edition of The Straits Times on January 15, 2018, with the headline 'No signs of January spurt slowing'. Print Edition | Subscribe