Dec 29, 2014

    S'pore bourse looks set to keep climbing

    AS THE year draws to a close, there is much to be thankful for, with the local bourse set to end on a positive note despite a year of wild swings.

    Over the weekend, feel-good factors from major global markets are giving rise to hopes that the Christmas rally will continue this week.

    In the United States, records were logged on Wall Street on Friday as investors kept pouring their money into the world's biggest economy. The Dow Jones Industrial Average added 23.5 points to hit 18,053.71, while the S&P 500 rose 6.9 points to 2,088.8.

    Significantly, the Dow has attained 38 fresh highs this year, while the S&P 500 was even more impressive, breaking the all-time high 52 times.

    "You have all of the economically sensitive sectors sort of leading the parade recently," Hugh Johnson, head of Hugh Johnson Advisers, told Agence France-Presse.

    "That tells us investors are becoming more optimistic about the economy, and that's really good news."

    Punters are banking on the continued recovery of the US economy, as strong figures for employment and retail sales lend support to the stock markets.

    Further evidence of confidence in US markets came in the form of the largest-ever weekly inflow into US-based funds, to the tune of US$36.5 billion (S$48.3 billion), data from Thomson Reuters Lipper service showed.

    New highs in US markets are fuelling the stock rally, Altegris chief investment officer Jack Rivkin told Reuters. "You want that portfolio at the end of the year to look like you knew what you were doing for the whole quarter, and that's pushing more money into stocks."

    With a dearth of major US data due this week - reports slated to be published include numbers on consumer confidence and trade deficit - the positive mood is unlikely to be dampened.

    Japan also announced on Saturday that the government will spend 3.5 trillion yen (S$38.5 billion) on fiscal measures to spur the economy, especially disaster- stricken areas.

    Pledges like those made by the Japanese government to do all it can to boost the economy bode well for corporate profits and, consequently, stock markets.

    Reports out over the weekend also state that the Chinese central bank will boost liquidity conditions by making it easier for financial institutions to lend more.

    These are all positive signals for Singapore shares, with investors expecting the Straits Times Index (STI) to continue its rally following seven straight days of gains. The benchmark index stood at 3,353.7 as of Friday, a 6 per cent hike for the year, and relatively higher than the 0.01 rise seen for the whole of last year.

    It is also a far cry from the shocks experienced earlier this year.

    Notable episodes of plunges include the losses suffered in October over concerns about the global economy - all the gains made for the year up to that point were wiped out on Oct 17.

    Another scare was seen on Dec 16, when the STI dropped 79 points - its worst one-day fall since June last year - as the sharp decline of oil prices took its toll on the market.

    Local investors have to thank the US Federal Reserve's continued promises to keep interest rates low for the turnaround since.

    The rally momentum, however, may slow on weak volumes as investors take a break over the holiday season. On Friday, for instance, trading volume came in at just 771.8 million shares worth $382.8 million, while 612.5 million shares worth $458.5 million were traded on Christmas Eve.

    Wildcard factors that could apply the brakes to the rally, however, cannot be ruled out.

    The FTSE ST Oil and Gas index dropped to 575.92 on Friday, down some 20 per cent from levels of around 735 in June. Crude- oil prices fell by about 45 per cent over the period.

    Much will also depend on how the Greek political crisis plays out today. The nation's reforms required under an international bailout plan could be derailed if Parliament does not elect the governing coalition's candidate for president.

    Should this happen, fresh general elections will have to be called, which may bring in a new government that opposes the country's bailout terms. This could trigger another round of market turmoil over the future of the European Union.

    All bets would be off then.