Jun 20, 2016

    Brits' 'leave or stay' vote holds sway over traders

    IF LAST week is any indication of how markets may move in the week ahead, then investors are likely to feel the jitters ahead.

    Brexit is on the cards and few are willing to stick their necks out on whether the Brits will vote to stay or leave the European Union when the referendum comes around on Thursday.

    Many have already rushed for cover, leaving the United States top indices - Dow Jones Industrial Average, S&P 500 and Nasdaq Composite - all down by over 1 per cent over the past week.

    The picture was not different in Asia. MSCI Asia ex-Japan shed 2.7 per cent for the week while Singapore's benchmark Straits Times Index pared 2.11 per cent.

    This was despite the mini rally on Friday, after the death of British MP Jo Cox prompted a temporary suspension of campaigning and gave hope that the Brits' "remain" camp may receive more support.

    Barring this potential swing in the so far evenly split public opinions, investors will do well to brace for Brexit, which some market watchers warned may cripple Europe's political future.

    "For the rest of the world, it is not just the fate of the British economy that concerns them but the broader impact on the European Union.

    "Would we see more referendums on EU memberships from disillusioned members?" IG Markets strategist Bernard Aw said.

    Meanwhile, other market events will also take place this week. The central banks in the Philippines and Thailand will have their latest policy meetings and both are expected to hold their rates steady.

    In Singapore, May's industrial production figures will be out on Friday, and Standard Chartered economist Jeff Ng expects a 4.1 per cent year-on-year rise after April's 2.9 per cent increase.

    With much distraction on the side, few counters in the local market have managed to stay resilient over the past month.

    But it was not all carnage. A few have stood firm, with Thai Beverage standing out.

    Since announcing its stellar first-quarter results - with net profit up 30 per cent year on year - on May 13, Thai Beverage shares have put on 22.7 per cent to 92 cents at last close, significantly outperforming STI's 1 per cent gain in the same period.

    City Developments has been the best-performing developer counter on the STI, up 8.2 per cent over the past month to $8.85 at last close.