Subdued trading could hit local bourse

A shortened trading week ahead in key markets, chiefly the United States, China, Hong Kong and Taiwan, plus Wall Street's subdued close overnight last Friday after the week's robust outing, could quelch activity in the local bourse.

On the flip side, a string of macro data out of the region could provide some direction for the stock market following a modest three-point gain by the key Straits Times Index (STI)over the previous week.

Come midweek will be the last trading day of May and the start of June when investors conduct their month-end window dressing which could lift stock prices.

Events are aplenty in June. Most traders expect the US Federal Reserve to raise interest rates at its upcoming meeting. The FOMC (Federal Open Market Committee) meeting minutes that were released over the past week suggested, however, that there were concerns about the slower US economy.

"The meeting minutes were neatly packaged with a dovish undertone. Although expectations of a rate hike in June were realised when Federal Reserve officials said it would 'soon be appropriate' to raise rates again, the longer-term hiking path remains clouded," FXTM Research analyst Lukman Otunuga said.

There are other reasons investors will remain hawk-eyed on the US - politics, of course.

More damning reports surfaced from US newspapers over the weekend surrounding the US presidency, this time a report that President Donald Trump's son-in-law and close adviser, Mr Jared Kushner, had undisclosed contacts with the Russian envoy.

Former Federal Bureau of Investigation director James Comey has agreed to testify in open session after the Memorial Day holiday today about the FBI's probe into Russian meddling in last year's presidential election.

Reports, however, say that the White House could try to exert pressure to bar Mr Comey from disclosing details. It remains to be seen how this will unfold.

SELL-OFF

"We would not be surprised should we find any aggravation of the situation in the Trump-Russia investigation inviting bearish sentiment for both the US equity and currency markets," said IG market strategist Jingyi Pan.

"This could, in turn, trigger a sell-off in global markets once again."

There is also a fortnight to go until the snap election in the UK. The UK statistics office recently revised down, albeit modestly, its first quarter growth estimates.

"Despite initial signs that things may not be as bad, Brexit is seemingly starting to weigh on the British economy," said Rabobank Research.

Brexit anxieties amid election uncertainty could weigh on equity markets.

Thin markets at the start of the week is likely with China and Taiwan markets closed today and Hong Kong to follow suit tomorrow.

Japan, the world's third largest economy, is set to release a slew of data over the week including jobs, retail sales, manufacturing and housing starts.

The economy is performing well this year and a weak yen is supporting export-facing manufacturers although the boost from global tech cycle is fading, said Moody's Analytics.

India and South Korea will report GDP figures while China will release May's manufacturing data which Moody's Analytics expects will likely show a slight recovery from an "overdone" deterioration in April.

According to a recent report by Singapore Exchange's investor education portal My Gateway, the STI has chalked up a total return of 14.1 per cent year-to-date, reflecting the domestic economy's robust performance and brighter outlook.

So far, the local market's barometer has outperformed its regional counterparts, namely Taiwan, Hong Kong, Malaysia, Indonesia and Japan.

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