Oct 07, 2015

    Asian rally after soft US jobs data and Pacific deal

    TWO pieces of news from abroad helped fuel an extended rally yesterday in bourses across Asia including Singapore's.

    The first was hopes of more monetary easing after Friday's disappointing United States jobs data. The second was a historic Pacific-wide free trade accord reached on Monday.

    A rally in blue chips lifted the benchmark Straits Times Index 1.62 per cent or 46.16 points to 2,897.41.

    Singtel jumped 2.7 per cent or 10 cents to $3.76; DBS Group Holdings gained 2.5 per cent or 41 cents to $16.92 and OCBC rose 1.2 per cent or 11 cents to $9.06. Global Logistic Properties jumped 3.8 per cent or eight cents to $2.17.

    "The main driver for the extended rally seemed to be hopes that we might see more monetary easing in the pipeline," IG market strategist Bernard Aw said.

    "Even so, you can't print your way out of the economic slowdown. More quantitative easing (if it happens) will be a negative signal that global economic activity still cannot stand on its own feet."

    Singapore and Indonesia have been among the strongest performers so far this week, rallying about 3 per cent and 5 per cent respectively.

    "The outsized gains may be due to their stock indices being one of the most sold-off recently. The STI slumped 15.9 per cent in the third quarter, while the Jakarta Composite tumbled 14 per cent," Mr Aw said.

    Remisier Desmond Leong expects volatility to increase when Chinese markets reopen tomorrow after the Golden Week holiday. "If the STI can stay above the key support (level) of 2,750, then it's good. But if it breaks, then we are back on a downtrend."

    News that Malaysia is slashing crude palm oil imports to manage its stock levels sent shares of Golden Agri-Resources jumping 8.6 per cent or three cents to 38 cents, with 47.5 million shares traded.

    Plantation Industries and Commodities Minister Amar Douglas Uggah Embas was cited in media reports as saying the move to cut imports was among measures to keep stocks at a "comfortable level" of about two million tonnes.

    He said the government was also taking other measures to manage the crude palm oil stock, including increasing biodiesel consumption and implementing a replanting incentive scheme effective Oct 1.

    Meanwhile, news that the US, Japan and 10 other Pacific Rim countries reached an agreement on the Trans Pacific Partnership (TPP) also boosted sentiment.

    If successfully ratified by each of the 12 TPP partner countries, it will be the biggest trade agreement in more than 20 years, covering about 40 per cent of world gross domestic product. However, optimism may be tempered by the fact that the deal still needs final approval from the US Congress, and faces a long ratification process.

    "For a start, there are several hurdles to overcome before it is implemented. After all, the last three US trade agreements were implemented only four to six years after they were signed," Capital Economics senior global economist Andrew Kenningham pointed out.