Singapore market may see some volatility but upside intact

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SINGAPORE – After hitting a high at 3,209.74 points last Monday, the Straits Times Index (STI) went somewhat flattish through the week as its main drivers, the banks, put up a somewhat muted performance.

Still, the benchmark Singapore index managed to eke out a 2.86 points gain from the previous Thursday (the previous Friday was a public holiday) to end last Friday at 3,184.56 points.

UOB advanced 1.1 per cent to $26.07, while OCBC added 0.2 per cent for the week to $11.79 and DBS declined 1.2 per cent to $28.65. DBS’s final dividend of 18 cents per share for its last financial year went ex-dividend on Wednesday.

Meanwhile over on Wall Street, equities continued to hit new records, boosted by the prospect of a solid economic rebound on the horizon.

The Jones Industrial Index gained 297.03 points last Friday to at 33,800.60 points. For the week, it was up 647.39 points.

The broader S&P 500 index closed at 4,128.80 points, posting its third-straight weekly rally and its the longest winning streak since October. The tech-heavy Nasdaq ended 70.88 points higher during last Friday’s session at 13,900.19, bringing its weekly gain to 420.08 points.

Helping sentiment was the pullback in Treasury yields, with the closely watched 10-year yield retreating to under 1.6 per cent.

Soothing words from the Federal Reserve, pledging to remain supportive of economic and employment growth, instead of being preoccupied by inflation concerns, further reassured the market.

Still, this week will see the release of several key data which could underpin sentiment.

Closely watched will be the March consumer price index data on Tuesday. This comes at the heels of a surprisingly higher-than-expected uptick of 1 per cent in the Producer Price Index, which was last Friday.

Also watched will be the US retail sales report for March, which could show the impact of the fiscal stimulus cheques of US$1,400 each recently distributed to all adult Americans.

But the week will also mark the kick-off of first quarter results. Most market insiders expect a strong earnings season, largely because it will come against a backdrop of dismal figures a year earlier.

The consensus seems to be for a 20-25 per cent marketwide upside in 1Q earnings.

Economic data aside, the Fed will be in focus once again this week as several Fed officials are scheduled to speak at various events.

The Economic Club of Washington will host Fed Chair Jerome Powell for a moderated Q&A and investors will be seek reassurance from the central bank chief that monetary policy will remain highly accommodative.

The Singapore market could see some volatility, though the upside remains intact.

Frasers Logistic & Commercial Trust is scheduled to join the STI effective on Tuesday, replacing Jardine Strategic Holdings, assuming the Jardine Matheson Holdings’ proposal to the 15 per cent of Jardine Strategic is approved by shareholders on April 12. With a market cap of over $5 billion, FLCT’s portfolio comprises 100 properties that span industrial nd commercial real estates, a portfolio value of approximately $6.2 billion spread across Australia, Germany, Singapore, the United Kingdom and the Netherlands.

On Wednesday, flash data is expected to show Singapore’s economy shrank only slightly in the first quarter of 2021, with a Reuters poll tipping a 0.2 per cent contraction year on year. On the same day, the Monetary Authority of Singapore is expected to keep its exchange-rate based policy settings unchanged in its semi-annual review, with inflationary pressures benign and major central banks likely to keep their interest rates low.

Most market strategists are sticking to their bullish medium term outlook prognosis for the market.

Vasu Menon, executive director for investment strategy at OCBC, said that with real interest rates firmly mired in negative territory, equities will outperform.

“So, stay the course but stay diversified as markets will remain volatile,” he advised.

It is a point echoed by Marc Van de Walle, global head of wealth management at Standard Chartered bank.

Addressing the concerns about a pullback, he wrote: “We do not expect a major bear market to develop, at least in the next year, given accelerating global growth and corporate earnings expectations and extremely loose policy settings.”

That said, a recent resurgence of Covid-19 cases in several developed economies could inject some nervousness into sentiment.

But the medium to longer term strategy for investors should be to pick the right stocks, and stay invested.

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