Mar 23, 2015

    US and China give confidence to markets

    PLEDGES by the world's two largest economies to maintain accommodative monetary and fiscal policies look set to continue lending support to markets here this week.

    The United States Federal Reserve's assurance last week that it is not rushing to raise interest rates boosted global equity markets.

    On Friday, the Dow Jones Industrial Average jumped 168.6 points or 0.9 per cent to 18,127.7, while the S&P 500 added 18.8 points or 0.9 per cent to 2,108.1.

    The tech-heavy Nasdaq Composite gained 34 points or 0.7 per cent to 5,026.4, its highest level since the bubbly boom days in 2000.

    Not to be outdone, the Shanghai Composite Index advanced 35 points or 1 per cent to 3,617.3 to hit a peak not witnessed since May 2008, notching up an impressive 7.3 per cent gain last week.

    China's rally was also fuelled by Premier Li Keqiang's comments that the government has enough ammunition to fire up a slowing economy, prompting talk of more stimulus measures.

    "With the Federal Open Market Committee being more dovish than expected, the Singapore stock market should trend higher," said Phillip Futures investment analyst Howie Lee.

    "All the major central banks in the world - (those of) the US, Europe and Japan - are keeping their monetary policies loose, which bodes well for equities."

    Key economic data that strategists are looking out for this week - for clues on how the Fed may move - include inflation and new home sales numbers tomorrow, and durable goods orders on Wednesday.

    A gauge of China's manufacturing sector will also be released tomorrow. A poor reading could add weight to renewed hopes for new stimulus measures.

    On the home front, inflation figures will be released today while industrial production numbers will be out on Thursday, which could factor into whether the Monetary Authority of Singapore further eases its monetary policy next month.

    Commodities trader Noble, which was consistently among the top volume counters last week, is likely to feature prominently again this week.

    Little-known Iceberg Research published its third and final report criticising Noble's accounting methods on Saturday.

    Iceberg attacked Noble for allegedly understating its gross debt by 41 per cent and its net debt by 64 per cent. A Noble spokesman said the company is aware of the report and is studying it.

    However, market observers noted that the Singapore stock market has had a lacklustre year so far.

    The Straits Times Index has been able to carve out year-to-date gains of 47.3 points or 1.4 per cent only because of a two-day rally last week.

    The benchmark index gained 50.7 points on Thursday and Friday to lift it to a close of 3,412.4, owing to the Fed's decision.

    Little excitement has been generated this year by way of initial public offerings to attract back foreign funds or the retail investor.

    The only new player to the market this year was BlackGold Natural Resources, which was listed on the secondary Catalist board on March 12 after a reverse takeover by NH Ceramics.

    Analysts noted that Singapore has been marginalised owing to the small size of its market, as companies go in search of bigger pools of investors in markets such as mainland China or Hong Kong.

    CMC Markets analyst Nicholas Teo believes that Singapore can still be a vibrant listing location if the authorities make a concerted effort to attract new or exciting sectors.

    "It could be e-commerce companies, attracting a steady stream of such firms to come to the market with incentives, not just one or two plays that will create fanfare for a short while.

    "If you look at Reits (real estate investment trusts), we went from zero to a market capitalisation of over $60 billion because there was a lot of promotion and a favourable tax regime."