Business

STI reduces loss for the week to 0.85%

Traders gauging Wall Street's reaction to developments in US over healthcare vote

The local market has always been vulnerable to external developments, most of the time those in the US.

Frequently, the focus is on the US Federal Reserve's actions and guidance with regard to interest rates; however, although this week's action provided a good example of America's influence here, this time it wasn't the Fed that held the market's attention; rather, traders waited to gauge Wall Street's reaction to developments in the US House of Representatives.

Specifically, the concern was that if the Trump administration fails to convince the House to vote for its healthcare plan, then this would cast serious doubt on future plans to push through fiscal and spending plans on which the stock market's post-US presidential election rally was built on.

As it turned out, a Thursday vote was postponed because members could not agree on terms. Reports suggest that it would be delayed until Friday.

In the meantime, news that President Donald Trump has threatened to walk away from the Bill and move on to tax reform if the House rejects it had, oddly enough, pushed the Dow futures higher in Asian trading on Friday.

The focus on US healthcare reform arose early in the week when it became clear that getting the Bill passed was no formality, as there was disagreement not just from the opposing Democrats but also within the dominant Republication Party.

The focus on US healthcare reform arose early in the week when it became clear that getting the Bill passed was no formality.

That meant Wall Street suffered its largest one-day loss of 2017 on Tuesday and had yet to recover on Wednesday and Thursday.

Here the Straits Times Index (STI) also suffered its largest single-day loss of the year when on Wednesday it reacted to Wall Street's plunge with a 1.3 per cent loss.

On Friday, trading was largely cautious but a 50-point rise in the Dow futures session saw the STI rise 15.97 points to 3,142.90, reducing its loss for the week to 27 points or 0.85 per cent.

The most notable feature of trading has been liquidity, which on Friday came to 2.3 billion units worth S$1.1 billion. On Friday a week earlier, dollar value hit S$1.9 billion, so the drop over five days has been a significant 42 per cent.

Excluding warrants there were 255 rises versus 200 falls on Friday.

Oil and gas (O&G) stocks were in focus in the early part of the week following news last weekend that Ezra Holdings has filed for US chapter 11 bankruptcy protection. Banks took a hit, but the selling was relatively well-contained given that the O&G's problems have been known for many months now.

Among the other developments of note during the week was that the Singapore Exchange and the Securities Association of Singapore on Thursday sent brokers a Guidance Note on what advice trading representatives (TRs) can offer their clients.

These guidelines are consistent with feedback received by the Monetary Authority of Singapore when it issued a consultation paper last June on allowing execution-related advice when trading in excluded investment products.

The guiding principle is that TRs can make investment recommendations provided they have a rationale for those recommendations. Examples include a positive sector outlook, low valuations and significant news announcements.

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