Greece and China news pave the way for S'pore market
NEWS that Germany has backed a Greek bailout extension and China's move to cut interest rates for the second time in three months to revive a slowing economy should serve as tailwinds for the Singapore market this week.
Local property counters, in particular, are set to gain from the move yesterday by China's central bank to lower the one-year deposit rate by 25 basis points to 2.5 per cent, and to cut the one-year lending rate by a quarter point to 5.35 per cent, market participants say.
China's Purchasing Managers' Index (PMI) contracted for a second straight month last month, according to data released yesterday. It did edge up to 49.9 points from 49.8 in January, but was still below the 50-point level that divides growth and contraction.
German lawmakers voted last Friday to extend the Greek bailout by four more months, despite some misgivings over Athens' willingness to make the needed economic reforms.
"The bailout extension should be a positive for the Straits Times Index (STI) in the early part of the week - it's one monkey off the back of financial markets for now," said Phillip Futures analyst Howie Lee.
"There are still fundamental issues that need to be fixed, but just making sure that the European Union stays together for now is a step in the right direction."
However, remisier Alvin Yong noted: "This changes nothing because the question remains: Will Greece stay in the euro zone once the four-month extension is up, or will it try to back out again?"
Also in the spotlight is the introduction today of a minimum trading price (MTP) of 20 cents a share for mainboard companies - a move by the Singapore Exchange aimed at curbing speculation and market manipulation.
The requirement will come into effect only after March 1 next year. Firms whose share prices fall below 20 cents will have until Feb 28, 2019, to comply with the MTP requirement, failing which they could be delisted.
A majority of some 250 out of 640-plus mainboard-listed firms, whose share prices are less than 20 cents, are likely to do share consolidations to comply with the requirement.
Mr Lee said the new rule, in the short term, could be a drag on trading volume.
"Investors in such companies should check their CDP (Central Depository) statement for the number of shares they hold, especially after a share consolidation," he said.
Attention will be focused on manufacturing PMI data from the United States today and US non-farm payroll data on Friday for indications on the timing of a US interest rate hike.
"If both manufacturing and non-farm payrolls - which indicate how employment is faring - are good, there is a higher chance of a rate hike by June," Mr Yong said.
Also coming out this week are Singapore's manufacturing PMI data and first-quarter results for department store operator Isetan Singapore, due tomorrow.
"Isetan's earnings will give us an idea about local consumption and spending. But results might not be good because of growing competition from online retail," Mr Yong said.
Germany and Britain will release Markit PMI data today.