Markets Insight

'Trump rally' faces market test

Tampines Mall, one of the 16 retail mall properties in CapitaLand Mall Trust's portfolio. The company will release results on Friday, as investors search for signs of a rebound during results reporting season.
Tampines Mall, one of the 16 retail mall properties in CapitaLand Mall Trust's portfolio. The company will release results on Friday, as investors search for signs of a rebound during results reporting season.PHOTO: CAPITALAND

With Trump to take office on Friday, Wall St increasingly uncertain about the outlook

The so-called "Trump rally" has set markets abuzz in recent weeks but the coming sessions may put the trend to the test - and the outcome is not at all clear, analysts warned.

United States President-elect Donald Trump will take office on Friday, starting what many have hoped will be a new era of increased fiscal spending and tax cuts that will benefit businesses, kick the US economic recovery up a gear and give the rest of the world a boost.

These expectations have lifted indices in this region. Singapore's benchmark Straits Times Index rose 2.11 per cent last week to 3,025.07, bringing gains to more than 8 per cent since early November.

But ultimately the future with Mr Trump remains very much a toss-up, and already Wall Street is slowing down for a reality check.

KGI Securities Singapore trading strategist Nicholas Teo wonders whether it is time to call Mr Trump's bluff.

"In the past couple of days, the 'Trump rally' has begun to show signs of cracking as markets revisit the reality of a Trump presidency… A Bloomberg report highlighted that the Dow Jones Industrial Average has closed within 1 per cent of the elusive 20,000 mark for 18 times out of the past 20 sessions," he said last Friday.

This range-bound trading indicates investors are uncertain about the market outlook, and is usually vulnerable to knee-jerk reactions triggered by news events.

IG market strategist Pan Jingyi does not see immediate clarity: "The first 100 days... will be key in forming market expectations for the rest of (Mr Trump's) term."

China will also reveal its fourth-quarter economic growth rate as well as December retail sales and industrial production figures on Friday. Economists expect the country to log growth of 6.7 per cent in the fourth quarter, similar to those of the previous three quarters.

Industrial production expanded by 6.1 per cent in December while retail sales rose 10.6 per cent, according to Moody's forecasts.

Back in Singapore, the start of the results reporting season will have investors searching for signs of a rebound in the corporate sector.

Notable companies lined up for their announcements this week include CapitaLand Commercial Trust on Wednesday, the Singapore Exchange on Thursday and CapitaLand Mall Trust on Friday .

DBS analysts expect CapitaLand Mall Trust - which has a portfolio of 16 retail mall properties across Singapore - to report 4.2 per cent revenue growth and 4.7 per cent net property income growth for financial year 2016, with a full-year distribution per unit of 11.2 cents.

As for CapitaLand Commercial Trust - which boasts premier office properties such as Capital Tower, Raffles City and CapitaGreen in its portfolio - revenue is expected to grow by 1.3 per cent, with a full-year DPU of 8.98 cents.

"Investors have been concerned over the value of CapitaLand Commercial Trust's portfolio given falling office rents," the DBS report said. "We believe this is unwarranted given the resilience of office property values in Singapore."

DBS gave CapitaLand Commercial Trust a buy rating and a $1.70 12-month price target. The trust's units last closed at $1.565.

A version of this article appeared in the print edition of The Straits Times on January 16, 2017, with the headline ''Trump rally' faces market test'. Print Edition | Subscribe