Business

Focus on Chinese data, trade tension

State of the global economy will also remain a concern

Central banks and their increasingly accommodative stances, US-China trade tension and worries of the state of the global economy will continue to influence sentiment this week.

United Overseas Bank economist Alvin Liew noted that US-China trade relations will remain under the spotlight as the US and China have re-started trade negotiations. But he also pointed to US President Trump's tweet on July 11 that China has not been buying the agricultural products that it has promised.

Investors will also be looking at today's deluge of Chinese data for the second quarter.

The most important of that will be Q2 gross domestic product (GDP), an important barometer for measuring the effects of rekindled trade tension between the US and China in May. According to a Bloomberg consensus forecast, growth in China is expected to slow slightly to 6.2 per cent year on year (yoy) from 6.4 per cent in Q1.

That said, growth in the second largest economy is likely to increase slightly to 1.5 per cent quarter on quarter (qoq) from 1.4 per cent in the previous quarter.

China's June retail sales, industrial production, unemployment data and home prices will also be out today.

On the local front, Friday's disappointing advanced estimates of Q2 GDP showed the effect of the US-China trade war and the global tech slowdown on the Singapore economy.

This week, investors will be looking at June's non-oil domestic exports on Wednesday. Market watchers are expecting another month of declines with a Bloomberg consensus estimate of a 9.1 per cent slide yoy and a 15.9 per cent qoq fall.

"Should Singapore's exports and imports figures come in better than expected, that could help solidify the Singapore dollar's recent gains against the greenback," FXTM market analyst Han Tan said.

The Fed's swing towards an accommodative stance has been followed by other central banks, which has seen investors in the local market head towards stocking up holdings in real estate investment trusts (Reits) since June.

According to the Singapore Exchange, S-Reits was the top net buy sector in the first half of this year, with net institutional inflows of $396.3 million. The increasing demand for Reits has also seen unit prices gain, with market watchers noting that many have reached high valuations and compressed yields.

That said, RHB Research Institute analyst Vijay Natarajan noted that there may be opportunities in Singapore-listed US office Reits, which are "relatively undervalued".

He said on Friday that US- office Reits listed on SGX currently offer an average FY2019 dividend yield of 7.4 per cent. This compares with the average yield of 5.2 per cent that Singapore office Reits offer. US-listed office Reits offer a yield of 3.6 per cent.

"In addition, US office Reits' dividends are not subject to Singapore corporate taxes in the hands of institutional unit holders, thus further boosting the underlying yield," Mr Natarajan added.

Elsewhere in the Asia-Pacific, June trade data from Indonesia and India will both be out today.

Meanwhile, New Zealand has Q2 inflation number due tomorrow and Australia has its June employment report out on Thursday.

Among regional central banks, the Bank of Korea and Bank Indonesia both have monetary policy decisions coming up on Thursday. This comes at a time when observers are expecting more central banks to lower policy rates amid the global economic slowdown.

"We expect the Bank of Korea to keep rates unchanged in July while we just revised our Bank Indonesia call, and we now expect (the central bank) to cut rates by 25 basis points in July followed by another 25 basis points in August," UOB's Mr Liew said.

The Reserve Bank of Australia will release its July policy meeting minutes tomorrow.

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BUSINESS & FINANCE