US, China data may give STI direction
THE Singapore equity market should regain a measure of calm after a harrowing drop last week, analysts say.
The Straits Times Index (STI) sank 47.02 points, or 1.45 per cent, to close at 3,202.5 last Friday - its lowest since Dec 16.
For the week, the STI was down 153.87 points, or 4.8 per cent.
The Shanghai Stock Exchange Composite Index had sunk 8.48 per cent last Monday, marking its biggest one-day drop in eight years.
A brief midweek respite failed to lift the index from the doldrums, which fell further through Friday to mark its steepest monthly decline of 15 per cent since August 2009.
The sentiment here was probably not helped by the earnings reports of some key companies, which fell short of market expectations.
Singapore's third-biggest lender United Overseas Bank, for instance, reported a 5.7 per cent fall in net profit to $762 million for the second quarter ended June 30, down from the same period a year ago.
Rail operator SMRT posted a 10 per cent drop in earnings to $20.1 million for its first quarter.
"Those (counters) had natural sellers, which triggered stock losses that brought the overall market to an exaggerated move," noted CMC Markets analyst Nicholas Teo, adding that last week's figures also reflected overselling because of the usual month-end futures rollover exercise.
Other notable movers included commodities blue chip Noble Group, which suffered its biggest monthly drop in 16 years after the Singapore bourse issued a warning on the company's shares, against a backdrop of slumping commodity prices. The stock tumbled 6.5 cents, or 12.5 per cent, to 45.5 cents last Friday - its lowest since 1999. It was down 39.5 per cent for the week.
Mr Teo expects a technical rebound in the STI this week, by about 30 to 50 points, given that the earnings season is at its tail end.
"A key driver for the market would be the big numbers coming from the United States," he said, pointing to the non-farm payroll statistics due to be released this Friday. "Clearly, the biggest risk factor would still be the impending Fed rate hike."
The Federal Open Market Committee meeting concluded last Wednesday, highlighting an improvement in the labour market. But it still left traders with little clue as to when exactly the interest rate increase will take place.
United States Federal Reserve chairman Janet Yellen had said that a rate hike would come only on the back of more economic progress, while market watchers expect it to happen some time in September.
Wall Street ended last week in negative territory. The Dow Jones Industrial Index slipped 0.32 per cent last Friday, up 0.69 per cent for the week, dragged down by disappointing results from oil majors ExxonMobil and Chevron.
For Asia, IG market strategist Bernard Aw said that China's Caixin purchasing managers' index figures, which were released last Saturday, may also play a part in moving the market here.
The preliminary numbers announced last month - which hit a 15-month low - had been "surprisingly weak", he said.
The Singapore market will be closed for four consecutive days over the weekend, thanks to the SG50 holiday on Friday as well as the National Day public holiday on the following Monday.
"We might get some cheer going into National Day," said Mr Teo. "But all eyes will definitely be on the upcoming elections, which is on the near-term horizon."