Business

STI hits two-year high

Index finishes at 3,460.45 ahead of a week packed with meetings by core central bankers and release of global macro data

The Singapore market echoed the upward trend in the US and European markets amid strong US jobs data and the successful conclusion of the first part of Brexit talks between the UK and European Union.

The Straits Times Index hit a 2½-year high, finishing 35.8 points or 1.05 per cent up at 3,460.45 yesterday, ahead of a week packed with meetings by core central bankers and release of global macro data.

Other major Asian bourses fared well too, with Japan's Nikkei 225 up 0.6 per cent, Hong Kong's Hang Seng rising 1.1 per cent and China's Shanghai Composite climbing nearly 1 per cent.

But IG Markets' Jingyi Pan said: "We are at the fore of a week filled with event risks and it would be of little surprise to see investors exercising caution ahead."

The US released mixed data last Friday; the outperformance in payrolls for November - the first jobs report that has not been distorted by the hurricanes lent further confidence for the Federal Reserve to lift rates this week - and a slow creeping wage inflation, which added to uncertainty in outlook for hikes into the new year.

Most expect the fifth hike in the US Federal Reserve's rate hike cycle to land on tomorrow's Federal Open Market Committee meeting, hence the focus will be on the economic projections and dot plot (a chart).

"At the moment, the three rate hikes the Fed is projecting for next year look reasonable, but the risk is that tax cuts push them to be more aggressive," said Bank of Singapore's chief economist Richard Jerram.

However, the Bill has still not been passed by Congress, so it might be too early for the impact to be reflected in the "dot plot" at the upcoming Fed meeting, he added.

The European Central Bank and Bank of England will meet on Thursday and are expected to hold their rates unchanged while hints of their monetary stances for next year will be closely examined.

Talk to reconcile the House and Senate versions of the US tax reform Bill will pick up momentum this week which could get markets moving.

Emerging markets' (EM) outperformance has been an enduring theme recently and this looks set to continue into next year, according to Citi Research.

"With more attractive expected returns than developed markets and a seemingly improved ability to endure shocks, there is an argument to be made that EM has 'grown-up' as an asset class and merits more attention from asset allocators," said Citi in an outlook report.

The factors that drove inflows to EM this year are still in place - currencies are not over-valued, real rates remain relatively high, current accounts remain strong and reserves are robust. A modestly weaker US dollar should also help support emerging market in-flows.

But there are challenges ahead and idiosyncratic risks across a number of emerging market countries, many related to elections next year.

"The acid test for EM as an asset class will be just how well the markets are able to absorb these shocks when they occur. On the evidence of this year, this resilience is rising," it added.

Turnover on the local bourse stood at 1.5 billion shares worth nearly 1 billion with gainers outpacing losers. Some 254 counters were up and 183 counters were down.

Exuberance surrounded ComfortDelGro following last Friday's announcement that it was taking a majority stake in Uber's rental car business with the stock jumping 12 cents or 6.3 per cent to $2.03. It was one of the most actives with 39 million shares worth $77 million done.

Troubled Noble Group bounced 1.6 cents or 13 per cent to 14.2 cents to reverse the falls in the prior three sessions.

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