Despite midweek blip, STI manages 2% gain

It was a Trump reflationary play that helped the Straits Times Index (STI) on Tuesday regain the 3,000 mark lost since early November 2015, and it was Trump-related disappointment that dragged the STI below that level two days later.

Yesterday, however, the index managed to regain it when it jumped 32.07 points or 1.1 per cent to 3,025.07, albeit in mediocre volume of S$1.7 billion units worth S$1.1 billion and with more than a hint of short-covering in the air.

The Dow futures on Friday traded about 20 points higher during the day but stood only eight points up at 5pm. For the week, the STI gained 62 points or 2 per cent.

All in all, it was a good chance to trade the three banks because they are thought to benefit the most from rising interest rates that would ensue if Mr Donald Trump follows through on his pre-election spending rhetoric, Global Logistic Properties because it is in takeover talks, and a handful of second liners, depending on their announcements.

Trump-related disappointment came at midweek, when he gave his first press conference since November but did not mention his economic plans that markets had wanted to hear. As a result, the Dow Jones Industrial Average came close to finishing above 20,000 for the first time ever but failed to do so, ending Thursday down 63 points at 19,891.

The Nasdaq Composite, which had set five consecutive all-time highs, also ended weaker. Here, the regaining of the 3,000 mark was accompanied by daily volume of just above $1 billion - not great but still a welcome improvement from the numerous sub-$1 billion days seen last year.

Among the reports of interest during the week was CIMB's Jan 11 "overweight" on property developers.

"The sector is trading at a 40 per cent discount to RNAV (revalued net asset value) close to one standard deviation discount from mean," said CIMB.

"At this level, we think there is little downside risk to RNAVs. With low gearing and deep capacity for reinvestment, we think that developers are well paced to tap into new opportunities''.

“The sector is trading at a 40 per cent discount to RNAV (revalued net asset value) close to one standard deviation discount from mean.”CIMB's Jan 11 report which had "overweight" on property developers

Deutsche Bank, in its Jan 12 Asia Economics Monthly report, "Navigating the bumps ahead", noted that Singapore evaded a technical recession in Q4 2016 with a stronger-than-expected rebound in its GDP.

"This puts the city state on track with our view of a moderately faster pace of expansion in 2017... Upside surprises in Singapore's macro data or a sustained material improvement in the city-state's economy, however, could hardly become a norm going forward, in our view. Apart from manufacturing, which exhibited a strong rebound, other components point to a fragile recovery."

In a Jan 13 special report titled "China: Prelude to a US-China trade war?", Deutsche noted that China has just started to impose anti-dumping duties (42.2 per cent to 53.7 per cent) and anti-subsidy tariffs (11.2 per cent to 12 per cent) on distiller's dried grains imported from the US on Jan 12, according to the Ministry of Commerce.

"Is this step by China a prelude to a full-fledged US-China trade war? We still view large-scale US-China trade war as a risk scenario. Nonetheless, there are indications that the chance of such risk materialising is on the rise," said Deutsche.

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