Apr 25, 2016

    Central banks, earnings in spotlight

    AN ACTION-PACKED week lies ahead as the Singapore corporate earnings season continues in full swing and as investors keenly await the United States Federal Open Market Committee (FOMC) and Bank of Japan monetary policy decisions on Thursday.

    They will also monitor closely the release of local economic data, starting with last month's consumer price index (CPI), due today.

    March's industrial production figures are due tomorrow while the first-quarter unemployment rate will be out on Thursday.

    Investors will also be eyeing the first-quarter earnings of United Overseas Bank and OCBC Bank before the market opens on Thursday and Friday, respectively. Of interest is the non-performing loan portfolio of both banks, traders say.

    DBS Group Holdings will release its first-quarter earnings on May 3.

    UOB KayHian, which has a buy call on the bank, expects DBS to maintain profitability despite a difficult operating environment in the first quarter.

    Punters are also awaiting an announcement by Sembcorp Marine of its first-quarter results after market trading hours on Wednesday.

    SembMarine shares have rebounded strongly in the last two weeks but could continue to come under selling pressure today on news that the shareholders of Sete Brasil, a major customer, had agreed to a plan to file for bankruptcy protection.

    Late last Friday, SembMarine said it had begun arbitration proceedings against Sete Brasil's subsidiaries to protect its interest. Sete Brasil has not paid Sembcorp Marine for orders worth billions since November 2014.

    The rig builder has seven drillships for Sete Brasil on its order books.

    Trading activity will likely be cautious ahead of the outcome of the US and Japanese central bank meetings on Thursday.

    "In the absence of clarity, investors will grasp at any market developments and economic data to ascertain trends. The chase for yields, given extremely low or negative bond returns, may also push money managers into stocks," IG market strategist Bernard Aw said.

    While investors are not expecting a rate hike on Thursday in the light of the dovish speech by Fed chair Janet Yellen on March 29, they are watching for Thursday's statement to shed light on the June meeting.

    As for the Bank of Japan, additional stimulus is expected some time this month.