SINGAPORE - To say it has been rough in September might seem like an understatement.
Not only was the market rocked by inflation and interest rate concerns, it also had to deal with the debt saga involving China-based property giant Evergrande and its potential contagion in other East Asian asset markets.
The question is whether, heading into the final quarter of the year, some semblance of calm will return.
The first trading day of this month saw the three key Wall Street indexes landing in positive territory. But all three were down for the week.
The Dow Jones ended at 34,326.46 points, down 1.36 per cent compared with the previous Friday. The broader S&P 500 index fared even worse, losing 2.21 per cent to close at 4,357.04 points.
The tech-laden Nasdaq slid 3.2 per cent to 14,566.70 points - its lowest weekly close since end-July.
The Straits Times Index fell almost 36 points last Friday to end at 3,051.11 in the wake of negative news flows from the United States and China. But for the week, the benchmark index was down just 10.24 points or 0.33 per cent.
As at Sept 30, the total value of the 665 companies listed on the Singapore bourse slipped 0.1 per cent to $845.5 billion, from the end of August. However, the market capitalisation of blue chips edged up 0.5 per cent to $508.2 billion. The three banks were the top blue chip gainers despite going through some turbulence.
On the broader front, rising global energy (read: oil) prices and an acute power shortage in China are adding to prevailing concerns about interest rates and inflation.
Analysts say the pandemic has created a global supply chain crunch that has intensified in the second half of this year.
"Supply-side challenges seem to be the more pressing concern (for the market) and have got worse of late," noted Mr Kelvin Tay, chief investment officer for the Asia-Pacific at UBS.
"The number of ships waiting to unload at ports is at record highs, sending shipping costs higher. Businesses are facing challenges obtaining key resources and the ISM (Institute for Supply Management) surveys are showing growing backlogs of orders while supply delivery times increase."
Meanwhile, an increasingly hawkish tone being set by various Federal Reserve officials in the US, including chairman Jerome Powell, suggests interest rate hikes are imminent later this quarter.
On the US political front, the Biden administration is wrestling with the left wing of its own Democratic party over its ambitious US$3.5 trillion (S$4.7 trillion) tax and spending plan, even as it tussles with Republican lawmakers over raising the debt ceiling.
All in all, the weeks ahead will be challenging for equity markets.
As Mr Vasu Menon, executive director for investment strategy at OCBC Wealth Management put it, October could remain volatile.
"Economic and political challenges in China and the US may continue to keep investors on the edge," he warned. "In China, power shortages are hurting an already weakening economy, with the continued regulatory crackdown and the Evergrande saga adding another layer of pressure and uncertainty.
"In the US, employment, inflation and other key economic data will be carefully watched by markets that are nervous about Fed policy and the Oct 18 deadline for the US debt ceiling, as politicians wrangle over US government spending and
Mr (Joe) Biden's massive infrastructure and social spending Bill."
For the week ahead, last month's US employment numbers are due on Friday. Bloomberg consensus estimates show that analysts expect an improvement in jobs growth from 235,00 in August to 500,000 last month, with the unemployment rate expected to fall from 5.2 per cent to 5.1 per cent over the same period. Wage growth is expected to rise from 4.3 per cent to 4.6 per cent.
The Opec-plus meeting today will be a key event to watch, given the 20 per cent surge in oil prices since late August due to a combination of higher demand and tight supply.
With oil price close to seven-year highs, there is increasing concern that further rises could fuel inflation and hurt consumer spending and corporate profits.
But stocks of oil and gas plays here - such as Kim Heng, Marco Polo Marine, RH Petrogas, Rex International and even Sembmarine - have seen greater activity on expectations that they will benefit from the oil price surge.
In China, the private-sector Caixin purchasing managers' index (PMI) figures for last month are due on Friday. These figures are important as they come after a weaker-than-expected official government PMI reading for last month. Released last week, it showed a contraction in manufacturing.
The Chinese stock markets have pulled back sharply since mid-February and could remain volatile as investors grapple with several uncertainties and headwinds that may not go away anytime soon.
The projected market volatility will provide opportunities. Watch stocks that can benefit from higher oil prices and the supply chain crunch.