Business

STI rises 1.1% over the week

The March 14 to 15 Federal Open Market Committee (FOMC) meeting was arguably the main feature of the past week, one whose outcome was just what the market wanted - an interest rate hike followed by guidance that there will probably be only two more for the rest of 2017.

This much was well-publicised in the aftermath of the market's "relief rally", described as such because there had been worry before the meeting that the FOMC might signal three more hikes instead of two.

Less publicised, but certainly just as relevant, was that the Atlanta Federal Reserve's most current forecast of US first-quarter GDP growth was downgraded from 1.2 per cent to 0.9 per cent.

In early February, the forecast was 3.2 per cent, so despite all the hoopla about a robust US economy, the reality is much more sobering.

In contrast, the numbers for the local economy do actually show an upturn, which is perhaps why the Straits Times Index managed two consecutive 19-month highs on Thursday and yesterday, gaining 36 points or 1.1 per cent over the course of the week at 3,169.38.

Yesterday's 5.86 points came with 2.2 billion units worth $1.9 billion, the highest for the week thanks to a large push on telcos after M1 suspended trading and a news report circulated that the telco was conducting a strategic review of its operations.

Yesterday, it was announced that non-oil domestic exports (NODX) accelerated by 21.5 per cent in February from a year ago to extend its growth into the fourth consecutive month, boosted by both electronics (+17.2 per cent) and non-electronics (+23.3 per cent).

Export growth also broadened to positive growth across all the Top 10 markets... Maybank Kim Eng economist Chua Hak Bin

"Singapore's export momentum continues in February, as the recovery broadens to non-electronics. Electronic exports also broaden beyond Integrated Circuits (ICs), which led the earlier improvement, to disk media products and parts of PC.

"Export growth also broadened to positive growth across all the Top 10 markets, where previously European Union and Malaysia were still negative," said Maybank Kim Eng economist Chua Hak Bin.

"This supports our view that the manufacturing and trade momentum remains strong, and will continue to lead and support growth in 2017."

Blue-chip activity has focused on the banks - because rising interest rates are thought to boost their bottom lines - and property stocks, after the government a week ago relaxed some cooling measures.

Oil and gas stocks have responded to swings in oil prices, while in the second line, the heavy rotational plays that marked trading a few weeks ago have tapered off.

Bank of America-Merrill Lynch, in its March 16 Equity Strategy report titled "A Sense of Cyclical Unease", said its global equity risk-love is in the 81st percentile of its 20-year history and that returns in this "oxygen-starved zone" are generally pedestrian, especially compared with the average.

"Our advice is the same as it was three weeks ago: Take profits in Asia/EM (emerging market) cyclical stocks, buy some quality defensives, and lower your net exposure from overweight to neutral," it added.

"Our longer-term bullishness is intact - based on reasonable valuations, undervalued currencies, good macro fundamentals and an expected torrent of free cash flow."

sivan@sph.com.sg

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