Markets react to US tax cut reform peril

Once again, US President Donald Trump's ability to push through the tax cut reform has been called into question, overshadowing the month-on-month rise in US retail sales in November and moderate Chinese data.

The sell-off continued yesterday, erasing gains earlier in the week. The benchmark Straits Times Index lost 18.84 points or 0.55 per cent to end at 3,416.94. For the week, the index lost nearly eight points.

Much of the losses were chalked up by banking stocks, which slid further for another day.

Shares of DBS Bank, OCBC Bank and United Overseas Bank knocked more than 13 points off the index.

DBS finished at $24.58, 40 cents or 1.6 per cent lower. OCBC ended the session down one cent to $12.30, while UOB closed 36 cents lower at $26.05.

Ms Margaret Yang of CMC Markets Singapore sounded a caution in her Friday morning note: "The Singapore stock market is lacking fresh catalysts as we are getting close to the year-end, and profit-taking activities kick off following an astonishing rally this year, particularly among bank shares.

"As I mentioned several times, Singapore banks' divid­end yield has dropped to their lowest level in nearly a decade, which serves as a warning signal that current valuation is rich and such low yield is no longer attractive to value investors."

Overnight on Wall Street, equities fell following news that Republican Senator Marco Rubio was considering voting against a final tax cut deal if certain demands were not met.

Not helping was news that at least two other members of his party remain uncertain about how they will vote, putting its wafer-thin majority in peril.

The Singapore stock market is lacking fresh catalysts as we are getting close to the year-end... Ms Margaret Yang of CMC Markets Singapore

IG Market's Pan Jingyi believes there will be no rest for the market before Christmas.

"With the tax vote nearing, the growing list of wavering lawmakers does add a degree of uncertainty and given the way we have seen markets react overnight, an even more drastic response next week should not be ruled out."

Trading across the region was mixed, with indices in Japan, Hong Kong, Malaysia and Australia ending lower while New Zealand and South Korea finished higher.

In the local market, turnover came in at 1.5 billion shares worth $1.3 billion, with the advance-decline score 173 to 209.

Singapore Airlines retreated from the day's high to finish one cent lower at $10.51, following news yesterday that it is rolling out new airfare pricing.

INVESTING

The airline earlier said it is investing US$850 million (S$1.15b) to fit its new products on its fleet of 19 A380s amid heightened competition.

On the actives list was NetLink NBN Trust's counter that rose half a cent to $0.825 on a volume of 56 million. In November, it posted profit attributable to unitholders of $12.99 million in its first financial period ended Sept 30.

Shares of Thai Beverage Public Company ended 1.5 cents higher at $0.97, with 27 million units traded. The company has until Dec 18 to submit a bidding price for Saigon Beer Alcohol Beverage Corp (Sabeco), in a deal estimated to be over US$2 billion.

Looking ahead, Mr Ricky Chau, Franklin Templeton's multi-asset solutions portfolio manager, said the measures of uncertainty may rise in 2018.

Stocks are not a pure investment in growth, they also bring exposure to volatility and this has been exceptionally low by historical standards, he said.

"If volatility were to return to more normal levels, this would likely be a headwind for global equity return potential, in our assessment."

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