Will STI hit high of 3,500 this week?
MARKET watchers are buzzing with anticipation after key regional indices, including the Straits Times Index (STI), last week rose to their highest levels since the global financial crisis.
Can the local market sustain this momentum after a week of steady gains?
The STI added 0.54 per cent last week to 3,472.38, its highest closing level since December 2007.
Opinion is mixed on the outlook and, given the overall economic climate, some observers are wary but others believe looser monetary policy in key Asian markets is fuelling the upswing.
Local investors were last week caught up in the Asian bull-run as the Shanghai Composite Index shot up 4.4 per cent over the week to its highest point since March 2008.
These new market highs are hardly against the run of play, said Voyage Research lead analyst Liu Jinshu.
"After the five-year bull run in the United States since the economic crises, the global hot money is now flowing to Asia where several economies - such as China, Japan and, more recently, Singapore - are starting to loosen monetary policies while the US tightens theirs."
CMC Markets analyst Nicholas Teo said: "New highs are usually followed by successive breakthroughs and the market is unlikely to suddenly reverse its form.
"The region's pull will continue to benefit Singapore, and as we enter the first-quarter earnings season, sentiments will be supported by what I believe to be better-than-expected corporate outlook."
Against this backdrop, the STI may hit 3,500 this week, remisier Alvin Yong said, but he noted that financial results announced in the coming weeks may still spring a few unpleasant surprises for global markets.
In the US, first-quarter profits of S&P 500 companies are projected to drop 2.9 per cent year-on-year, data by Thomson Reuters showed.
"There's a bit of a rough patch ahead, but I think we should be able to jump over lower expectations. I don't anticipate a sharp fall in stocks throughout the season," JP Morgan Asset Management global market strategist David Lebovitz told Reuters.
At home, investors should still adopt a selective stance given limited earnings visibility, UOB Kay Hian said in a recent note, highlighting banking and property as favourable second-quarter plays.
"We maintain overweight (on local banks) as recent increases in Sibor (Singapore interbank offered rate) and Swap Offer Rates should have a positive impact on net interest margins starting second quarter and asset quality should stay resilient," it said.
The firm added that the market has also over-discounted the negative prospects for the residential property segment.
DBS Group Holdings, OCBC Bank and United Overseas Bank (UOB) have remained market favourites, with DBS shares rising 23.42 per cent in the past year, while OCBC and UOB chalked up 12-month gains of 13.09 per cent and 5.75 per cent respectively.
Meanwhile, Mr Yong agreed that property counters are a good choice to play STI's current surge.
"Despite concerns over the cooling measures and weak demand, property stocks still offer good value - the sector is at a roughly 30 to 50 per cent discount to revalued net asset value."
Among property stocks, Wing Tai and Ho Bee stood out with 11.8 per cent and 11.33 per cent rises respectively since the start of last month, as investors bet on potential privatisation bids.
DBS Vickers said in a report that delisting is unlikely for Wing Tai owing to the high cost, but it still gave Wing Tai - along with Frasers Centrepoint and UOL - buy ratings owing to their attractive valuations.