STI rises for third straight day

What a difference a year makes - in the first three trading sessions of last year, the Straits Times Index plunged 78 points, or 2.7 per cent, to 2,804, sending analysts scrambling to determine where the downside support might lie.

In contrast, in the first three days of this year, the STI gained 74 points, or 2.6 per cent, at 2,954.14 including yesterday's 32.83 points jump, prompting observers to wonder if the upside resistance of 3,000 might soon be breached.

What has changed? Liquidity has improved slightly - daily volume in the first days of last year hovered close to the S$1 billion mark while yesterday's turnover amounted to 2.1 billion units worth S$1.3 billion.

Noble Group and oil and gas stocks Ezion and Ezra topped the actives list a year back as they did this week, while banks, the Jardine Group and Singtel were the main five index drivers - as they were on Tuesday to Thursday.

Yesterday, rises in the five added almost 22 points to the STI, the latter's strong showing helping the broad market record 301 rises versus 165 falls, excluding warrants.

Privatisations became a prominent feature of last year and with 2017 barely one week old, the possibility of the market's first takeover/privatisation emerged when United Engineers' shares jumped S$0.09 to S$2.66 on volume of 1.7 million, prompting a query from the exchange and a trading halt by the company a short while later.

Also queried was Global Logistic Properties, the shares of which shot up S$0.16, or 7.1 per cent, to S$2.40 with 33.2 million done before trading was halted.

Within the region, fears of China slowing down which started in early last year (and led to a calculated devaluing of the yuan) are still in existence today - if anything, those worries could escalate if the incoming US administration lives up to its election rhetoric of trade sanctions against China.

Global inflation is likely to rise to 2.5 per cent... as year-on-year energy price inflation will show a large rebound from the lows. Schroders 2017 Multi-Asset Outlook

The only substantive change has occurred in the US where growth expectations have in the past month been raised. The US Federal Reserve, for example, in its December meeting, indicated that upside risks to their forecasts for economic growth had increased as a result of prospects for more expansionary fiscal policies in coming years.

It said "asset price movements and changes in the expected path for US monetary policy beyond December appeared to be driven largely by expectations of more expansionary fiscal policy in the aftermath of US elections".

If monetary policy options have been pushed to the limit to cushion the impact of 2008's US sub-prime crisis, then it appears that markets are now banking on fiscal policy to take over.

Schroders, in its 2017 Multi-Asset Outlook, said it has increased its 2017 global gross domestic product forecast to 2.8 per cent on expectations of stimulus from the Trump administration and China, plus slightly better performance from countries such as the UK.

"Global inflation is likely to rise to 2.5 per cent, possibly even 3 per cent, as year-on-year energy price inflation will show a large rebound from the lows.''

It added that "the low growth, low interest rate environment that has persisted for a number of years has resulted in extended valuations for higher quality parts of the market'' thus causing it to rotate into value areas that have been out of favour in recent years, such as Japanese equities and emerging market assets and commodities.

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