Markets Insight

Wall Street highs likely to boost STI

The New York Stock Exchange in Manhattan. Buoyed by resurgent global trade and economic growth, Wall Street is now in the second longest bull market in US history, with the Dow up 27 per cent in the past year and 250 per cent since it bottomed out in
The New York Stock Exchange in Manhattan. Buoyed by resurgent global trade and economic growth, Wall Street is now in the second longest bull market in US history, with the Dow up 27 per cent in the past year and 250 per cent since it bottomed out in March 2009 during the global financial crisis.PHOTO: AGENCE FRANCE-PRESSE

Hope over Trump's tax cut plan sends US indices to record levels

Singapore shares are likely to start the trading week on a positive note, thanks to record finishes on Wall Street.

Increased hopes that President Donald Trump's tax cut plan will move ahead sent all three key US indices - the Dow, S&P 500 and Nasdaq - to all-time closing highs, extending their recent run of records.

The markets were cheered by a vote in the US Senate late last Thursday for a federal budget plan that allows it to pass a tax cut plan with a simple majority vote instead of a 60-member supermajority.

The Dow Jones Industrial Average rose 165.59 points, or 0.7 per cent, last Friday to close at 23,328.63.

Buoyed by resurgent global trade and economic growth, Wall Street is now in the second longest bull market in US history, with the Dow up 27 per cent in the past year and 250 per cent since it bottomed out in March 2009 during the global financial crisis.

The Dow has also posted 53 records since January, poised for the most since 1995. In the week just ended, the measure crossed the 23,000 level for the first time ever - the sixth 1,000-point milestone reached in the past 12 months.

The Nasdaq 100 Index has finished at all-time highs 62 different times this year, on a par with the most ever in 1999, while the S&P 500 has produced 49 fresh records.

The markets are ignoring bad news ranging from North Korea to a dysfunctional Trump White House and corporate profit slowdown in the United States.

But while third-quarter profit growth is forecast to drop to 2.6 per cent for S&P 500 companies from around 10 per cent in the first half, analysts see a rebound in the next few quarters as hurricane damage dissipates, Bloomberg reported.

This week, investors will be eyeing the earnings of a slew of American companies on the S&P 500 Index due to deliver their reports. Besides corporate earnings, the US economy will also be due for a third-quarter growth report. The selection of the next Fed chair will remain in focus too.

The Straits Times Index (STI) closed up 0.7 per cent for the week, boosted by positive sentiment on property and bank stocks.

This week, investors here will be eyeing OCBC Bank, the first of the three local banks to release third-quarter results, as well as Singapore's September industrial production data. Both are to be released on Thursday.

Also closely watched will be the Urban Redevelopment Authority's (URA) final third-quarter property data, due on Friday, which will likely influence the performance of property counters.

One company on traders' radar is Tuan Sing Holdings, which is releasing its third-quarter results on Thursday.

Small to mid-cap property counters have been among the biggest beneficiaries following the upturn in URA's preliminary private home price index released earlier this month. Its official estimates suggested that private residential property prices have finally turned around after four years of decline.

Several stocks, such as Chip Eng Seng, Tuan Sing and Wing Tai Holdings, have hit multi-year highs. Bargain hunters have also been piling into mid-cap property counters including Far East Orchard, GuocoLand and Yanlord Land Group as these remain undervalued counters.

Goldman Sachs has upgraded its call on Yanlord to "buy" from "neutral", and maintained a 12-month target price of $2.19.

"We believe its year-to-date share price underperformance ... has more than priced in its weak sales performance year to date. Despite near-term challenges, we believe Yanlord's quality land bank and strong brand recognition offer high visibility of monetisation of its land bank in the longer run," it said.

Apart from property data, this week will see the release of Singapore's consumer price index for September today and industrial production figures for the same month on Thursday.

A version of this article appeared in the print edition of The Straits Times on October 23, 2017, with the headline 'Wall Street highs likely to boost STI'. Print Edition | Subscribe