May 16, 2016

    Traders keep eye on Fed, privatisation candidates

    THE trading week ahead looks set to be dominated yet again by the United States Federal Reserve, with market participants sidelined ahead of further clues on the next rate hike from at least four officials and the release of minutes of last month's meeting.

    The local corporate earnings season continues to be in full swing, with the performance of small and medium-sized enterprises under scrutiny.

    The fourth-quarter earnings of Global Logistic Properties is among those watched.

    Traders are also watching for announcements this week from at least two companies, Eu Yan Sang International and CWT, widely speculated to be privatisation targets.

    Eu Yan Sang, which called for a trading halt on Tuesday, is rumoured to likely be delisted and taken private given the challenging outlook in retail and depressed valuations.

    Logistics firm CWT is supposedly in talks with Chinese conglomerate HNA Group over a potential sale of a controlling stake in a deal worth around US$1 billion (S$1.4 billion).

    A deal could be announced as early as next week, according to media reports.

    So far, the results of several blue chips, including Singapore Airlines and Wilmar International, have not been up to snuff, said Lee Yu Sheng, a dealer with Maybank Kim Eng.

    This could lead to more analysts revising down full-year estimates for local corporate earnings, he added.

    Data as of April 20 from

    EPFR Global, which tracks mutual fund flows, shows Singapore has sustained equity outflows since last September - a factor behind the thinning liquidity.

    Equity funds bought a net US$154 million worth of Singapore equity since the start of the year through May 10, compared with US$468 million in the same period last year,

    EPFR director of research Cameron Brandt told The Straits Times last week.

    He noted that the local market has "underperformed compared to its regional peers and the emerging Asian markets".

    "Fund managers appear to be reallocating to more dynamic markets rather than running for cover as they did during the 2008 financial crisis," he added.

    Also weighing on market sentiment are signals from more US central bank officials who appear to be in favour of a rate hike sooner than later.

    Last week, Boston Fed president Eric Rosengren and Kansas City Fed's Esther George, both voters on the Federal Open Market Committee, said the central bank risks stoking an asset bubble by delaying action for too long.

    The Fed will also release the minutes of its April meeting on Thursday morning.

    It will give a clearer picture of where rates are likely to be headed.