Nov 09, 2015

    All eyes on timing of Fed interest rate hike

    INVESTORS here look set to take their cues from events in the world's two biggest economies this week.

    In China, new data out yesterday showed exports last month fell for a fourth straight month, by 6.9 per cent, in the latest sign of the softening economy.

    And in the United States, speculation over the timing of the impending interest rate hike will also occupy traders' minds, analysts said.

    More corporate earnings reports will also be released.

    On Friday, Wall Street reversed losses with a 0.26 per cent gain as traders received a confidence boost from the biggest monthly surge in non-farm payrolls this year.

    US Federal Reserve chair Janet Yellen had said last Wednesday that the possibility of raising interest rates next month is still on the table, and that the move would be "the prudent thing to do".

    "People need to prepare for a December rate hike," John Canally, chief economic strategist at LPL Financial Corp in Boston, told Bloomberg. "I'd expect the probability of a December liftoff to go to the low 90s, unless something really bad happens between now and then. There's no soft spot in the economy, that's over. Things are tightening all around."

    At home, the Straits Times Index on Friday slid 13.18 points, or 0.44 per cent, to 3,010.47, weighed down by the possibility of a rate hike in the US next month.

    But for the week, it climbed 12.12 points or 0.4 per cent.

    Remisier Desmond Leong noted that while trading through the week had been quite volatile, there have been encouraging signs of market sentiment picking up.

    "There is buying opportunity and people are buying, which is a good sign," he said, adding that the rebound last month could also suggest that the market has "already based out for the near term".

    "I'm a little more bullish (on the index) now. It's likely to go sideways or up slightly from here."

    Mr Leong noted last week's earnings reports generally came in within expectations with "no big shocks".

    DBS Group Holdings last Monday posted a healthy 6 per cent growth in net profit to $1.07 billion for the third quarter to Sept 30, beating market forecasts. But the stock ended the week 11 cents or 0.63 per cent lower at $17.40, as analysts expressed concerns over the broader outlook for local banks given the imminent rise in interest rates.

    OCBC Bank and United Overseas Bank had both reported lower earnings in the previous week.

    Real estate giant CapitaLand rose three cents or 0.94 per cent to $3.23 on Friday, after announcing earlier that its third-quarter net profit surged 48.3 per cent to $192.72 million, while aerospace and defence conglomerate Singapore Technologies Engineering slipped eight cents or 2.42 per cent to $3.22, despite logging a 9.9 per cent rise in net profit to $133.3 million.

    Outside of the blue chips, Singapore Post was flat at $1.895, even after logging a 38.5 per cent jump in net profit to $53.4 million.

    Mr Leong said investors will likely continue to look out for the next move coming from the US, given that "everybody globally is looking there now, while China has taken a bit of a backseat".

    Closer to home, companies announcing their earnings this week will likely drive the market as well.

    "But I don't think the numbers going forward will be fantastic," he added. "Earlier we just dodged a technical recession by a hairline. It's not just us, it's China and everywhere else as well."

    The market will be closed tomorrow for the Deepavali holiday.