Jul 25, 2016

    Investors may hold back ahead of Fed, BOJ news

    AFTER another week of gains across the global markets, stock market bulls may turn hesitant in the coming days as they await the outcome of key central bank meetings.

    The United States Federal Reserve will have its two-day July meeting tomorrow, bringing the questions around the next interest rate hike back to the fore.

    Judging from the recent Fed official comments, a decision to hike is very unlikely to come in this meeting, IG markets strategist Bernard Aw said.

    "What the investors will look out for is (the Fed's) post-decision statement... saying the US economy is on a more solid footing than it was in June," he said.

    The orderly return to normalcy in the financial markets after the Brexit vote and the better than expected June job data are likely to be factors that will determine if another hike takes place by the year end.

    The Dow Jones Industrial Average added 0.3 per cent last week to mark four straight weeks of run-up, while London's FTSE 100 saw five straight weeks of gains in the post-Brexit rally, helped in part by expectations of stimulus from the Bank of England.

    In Asia, the Bank of Japan's July meeting on Thursday is also in focus but there is less clarity on this front.

    "Instead of the Fed hike, investors are now more concerned about the BOJ's upcoming decision. If it disappoints the market expectation for easing, expect some volatility just like last month," said remisier Alvin Yong, referring to Nikkei's 3.1 per cent plunge on June 16 after the last BOJ meeting.

    The STI rose another 0.68 per cent last week, pushing the recovery since Brexit to some 7.7 per cent in line with the recent global momentum.

    But a slew of results news revealed the bumpy business environment in the backdrop.

    Keppel Corp's 48 per cent drop in second-quarter net profit triggered further sell-off on the firm. It shed 1.43 per cent on Friday and was down 2.1 per cent for the week to $5.50.

    Investors have also been bearish on Sembcorp Marine, and the shares dropped 4.5 per cent last week to $1.48, ahead of its second-quarter results announcement this Thursday.