Jul 20, 2015

    Investors to focus on firms' Q2 earnings

    SECOND-QUARTER corporate earnings at home are set to grab the attention of investors in the coming weeks, as fears of Greece's exit from the euro zone recede and China's equity rout appears to be levelling off.

    Analysts are divided on their outlook this earnings season, as they are split on whether the local economy has turned the corner.

    According to the latest official advance estimates, Singapore's economic output shrank 4.6 per cent in the second quarter over the previous quarter.

    But last month's non-oil domestic export data - which posted an unexpectedly strong gain of 4.7 per cent year on year, compared with a 0.3 per cent decline in May - could lead to a lift in the final second-quarter economic growth reading, depending on how strong last month's industrial production was, economists say. Singapore's industrial production data for last month is due out on Friday.

    Some traders are watching CapitaLand Commercial Trust's second-quarter results, due out before the start of trading on Friday, and those for CapitaLand Mall Trust, due out before 8am on Wednesday, for clues on the health of local office and retail markets.

    Meanwhile, news last Friday that China has made up to 3 trillion yuan (S$660 billion) of funding available to government agency China Securities Finance Corp to stem a stock-market rout, which has roiled financial markets worldwide in recent weeks, should help stabilise regional bourses.

    The money may be used to buy shares and provide liquidity to brokerages, reports say.

    A recovery in Chinese home prices for a second straight month may give a fillip to CapitaLand, which has exposure in China, analysts say.

    Average new home prices across China rose 0.4 per cent last month from May, according to Reuters calculations from official data out on Saturday. That was a stronger gain than the 0.2 per cent rise in May, the first monthly increase since April last year.

    This is seen as a sign of bottoming out for one of China's key sectors and should ease fears of a sharp economic slowdown.

    Traders are also looking for signs on the health of the global economy from purchasing managers' index (PMI) factory data from China, Germany, France and the United States, all due on Friday.

    "Flash HSBC PMI manufacturing data for China should give us further clues on whether the government will introduce more stimulus measures," CMC Markets analyst Nicholas Teo said.

    "If manufacturing activity is expanding in all those countries, that will show the global economy is recovering, which should have a positive impact on our market," he added.

    Reports on state-investment firm Temasek Holdings having put Neptune Orient Lines (NOL) up for sale may fan tailwinds for the struggling container shipping firm this week. The stock closed on Thursday at 87.5 cents, up 0.6 per cent, or 0.5 cent on 4.23 million shares traded.

    The potential sale of the entire company was made easier when NOL, 65 per cent-owned by Temasek, announced earlier this year the sale of its profitable logistics business, APL Logistics, for US$1.2 billion (S$1.6 billion) to Japan's Kintetsu World Express.