Markets Insights

Quieter week ahead as investors pull back

The US Federal Reserve is expected to hold interest rates but may commence its balance-sheet reduction. This, along with rising geopolitical tensions in the Korean peninsula and the German elections, is among several important events next month that
The US Federal Reserve is expected to hold interest rates but may commence its balance-sheet reduction. This, along with rising geopolitical tensions in the Korean peninsula and the German elections, is among several important events next month that may result in a jittery equity market this month, noted DBS Equity Research.PHOTO: AGENCE FRANCE-PRESSE

Strong US jobs data for July could also see funds moving to the US

Investors here could see a quieter week ahead in view of the National Day holiday, while the corporate reporting season nears its tail end.

The Singapore market is closed on Wednesday for the Republic's 52nd birthday celebrations.

And with the bulk of this quarter's earnings reports now done, the market could see some pullback as investors take profits off the table, Mr Nicholas Teo, trading strategist at KGI Securities (Singapore), told The Straits Times.

"I do think the market has gone up too much too fast, and a lot of the key risks have already been priced in," he said, noting this means that further gains could be capped.

A robust set of hiring data for July in the United States that was out last Friday could also spur a short-term reversal of funds from this part of the world back into the US, said Mr Teo. Wall Street's Dow Jones Industrial Average advanced for a ninth straight day to hit another record.

In a similar vein, DBS Equity Research noted that several important events next month may result in a jittery equity market this month. These include a confluence of central banks' policy meetings, including the US Federal Reserve, which is expected to hold interest rates but may commence its balance-sheet reduction, rising geopolitical tensions in the Korean peninsula, and the German elections.

NO FURTHER GAINS SEEN

I do think the market has gone up too much too fast, and a lot of the key risks have already been priced in.

MR NICHOLAS TEO, trading strategist at KGI Securities (Singapore), on how the market could see some investors take profits off the table as the bulk of this quarter's earnings reports is done.

"Investors could capitalise on the latest rally to pare down equity exposure ahead of these developments," DBS said.

The Straits Times Index slid 4.23 points, or 0.13 per cent, for the whole of last week, after racking up a 16.4-point, or 0.49 per cent, drop to 3,326.52 last Friday.

DBS Group Holdings hogged the limelight - as did all three banking stocks for most of the week - as it delivered an 8 per cent growth in second-quarter earnings to $1.14 billion before the markets opened last Friday. But the counter sank 2.7 per cent, or 59 cents, to $21.49, after the bank warned that provisions for its oil and gas portfolio could be higher than previously guided.

Meanwhile, property stocks were in play. City Developments, for example, surged 6.9 per cent through the week to close at $12.06.

Commodity trader Noble Group was again questioned last Thursday on its financials in a report from Iceberg Research, which also criticised the local regulators for their role in the saga.

The Monetary Authority of Singapore (MAS) responded to Iceberg a day later, saying that it "will not hesitate to take the necessary enforcement actions" should it uncover any violations of regulations through its own investigations. "MAS will also investigate potential breaches of the law that have been referred to us," said a spokesman.

All eyes will be on ST Engineering, Singtel and ComfortDelGro, which are due to release their results on Friday.

On the economic front, China will be releasing foreign trade data tomorrow, followed by consumer and producer price inflation figures on Wednesday. Hong Kong is due to publish second-quarter gross domestic product numbers on Friday.

A version of this article appeared in the print edition of The Straits Times on August 07, 2017, with the headline 'Quieter week ahead as investors pull back'. Print Edition | Subscribe