Business

Many catalysts to spark STI's climb

Must all good things come to an end? Based on the Straits Times Index's (STI) track record, what goes up must come down, but perhaps the climb this time can last a little longer and further, given the right catalysts.

As Ms Margaret Yang of CMC Markets Singapore put it, the 3,300-point mark is a psychological and technical resistance level for the STI, and breaking above this point paves the way for more upside towards the previous high of 3,354 points.

If it gives any confidence, the STI gained 16 points on Friday to finish at 3,319.11, above the technical resistance level.

The week's gains were mainly led by the banks, of which the prices were driven by the rationale that higher interest rates signal wider net interest margins and therefore earnings.

Other factors included upbeat gross domestic product (GDP) readings and the Monetary Authority of Singapore's (MAS) policy decision.

IG analyst Jingyi Pan said in a recent note that Asian markets had charged ahead last week with gains having flowed in as the Chinese and South Korea markets played catch-up post holidays, while the dovish perception towards the US Federal Reserve also enlivened stock prices in this part of the world.

Ahead of the earnings season, whether this upward momentum can continue hinges on whether there are enough catalysts to keep it going.

Barring any circus act from unnamed world leaders, the STI may be off to a good start today following advances on Wall Street over the weekend.

Upbeat economic data and gains in technology shares sent the Dow and the S&P to a fifth straight week of gains.

Still, there is a worry that the STI may not find resilient numbers out of tomorrow's September non-oil domestic export update. If so, the development is likely to increase the influence of external leads upon the STI, barring significant movements from local earnings reports on the index.

Whatever the case, trading may slow given that Wednesday is a market holiday for Singapore and Malaysia, while it is Thursday for India.

Q3 EARNINGS

In the week ahead, about 11 per cent of the companies on the S&P 500 Index are due to report their Q3 earnings including big names Morgan Stanley, Goldman Sachs Group and Netflix, while heavyweights such as IBM and Johnson & Johnson are the ones to look out for on the Dow.

Said Ms Pan: "Separately, the debate over the US dollar trajectory is expected to sustain after the Federal Open Market Committee minutes threw a spanner in the works for the US dollar recovery this week.

"Dovish perception towards the latest Fed minutes opens up room for further evaluation of the Fed's position on rate hikes.

"In the coming week, industrial production and housing data in the US would be things to watch, coupled with two appearances by Fed chair Janet Yellen."

Also on the radar is the nomination of the next Fed chair by US President Donald Trump, although delays into the month's end should not be ruled out as suggested by US Treasury Secretary Steven Mnuchin, added Ms Pan.

Another superpower that investors will likely keep tabs on is China as the 19th National Party Congress is set to begin on Wednesday and will set the tone and map out the economic and political directions for the next five years. So, Asian markets may very well trade to the tune of the policies rolled out from this meeting, in addition to the set of data due in the week as Ms Pan noted.

"This will include inflation releases at the start of the week and China's Q3 GDP, industrial production and also fixed asset investments on Thursday.

"The week is packed with events that could rejuvenate the market and help the index climb further, so investors will have to keep a close watch on the unfolding developments to see what call they ought to make."

This article appears in The Business Times today. For full listings of SGX prices, go to http://btd.sg/BTmkts