US Fed & ECB minutes, weak oil to blame?
Week of largely featureless trading
On the face of it, North Korea's missile test may have had something to do with the cloud of uncertainty that hung over markets this week and capped gains, though why this test should be any different from the many others that preceded it over the past few years is a mystery.
According to some observers, the more likely factors were the hawkish tone struck by the US Federal Reserve and the European Central Bank in their releases this week and a slide in oil prices.
Whatever the reason, US Treasuries were sold off on Thursday, pushing up yields and dragging stocks sharply lower.
The reaction here yesterday was a mainly weak session for the Straits Times Index, though a late push enabled it to close with a net gain of 2.67 points at 3,229.01, a gain which meant it added three points for the week.
Liquidity has been mediocre of late, with daily volume regularly hovering around the industry's ballpark breakeven point of $1 billion.
On Friday, a weak 1.4 billion units worth $886 million was transacted and, excluding warrants, there were 135 rises versus 264 falls throughout the whole market.
Brokers here described trading as largely featureless, with the index stuck within a trading range.
Commodities firm Noble Group was in the limelight on Thursday when its shares rocketed up 36.2 per cent, drawing a query from the Singapore Exchange.
The Fed is convinced that the dip in inflation readings is only transitory...Julius Baer economist Stephanie Lindeck, who added that if things turn out otherwise, the central bank would adjust its tightening plans
The company replied that it did not know of the reasons why its shares were in play.
On Friday, the stock fell back by $0.065 or 10.2 per cent to $0.575 with 40.3 million traded.
Printed circuit board and semiconductor firm Jadason was another second-liner in play, largely because it is enjoying a turnaround in fortunes.
As for blue chips, it came as no surprise that the main plays were on banks, Jardine stocks and property counters.
Maybank Kim Eng in a July 6 Singapore Property report said after it upgraded the sector it recently met Hong Kong investors.
"We sense that clients are hesitant to raise exposure aggressively following the strong year-to-date rally for developer stocks," the broker noted.
"Nonetheless, we continue to see an upward bias for developer stocks and reiterate that an impending rebound in home prices is a sector catalyst to watch...
"Investors agree that despite a still weak rental market, downside risks to home prices will be mitigated by ample liquidity and healthy affordability ratios."
On the minutes of the June Federal Open Markets Committee meeting, Stephanie Lindeck, an economist at Julius Baer, said in her "FOMC sticks to its plan" comment that the Fed is confident with its rate normalisation plans and the reduction of the balance sheet.
"However, recent weak inflation data keeps some of the Fed members puzzled.
"The Fed is convinced that the dip in inflation readings is only transitory but if things turn out otherwise, the central bank would adjust its tightening plans," pointed out Ms Lindeck, who remains confident in her forecast that the Fed will raise rates in December again and sees the US dollar profiting from too low market expectations.
This article appears in The Business Times today. For full listings of SGX prices, go to btd.sg/BTmkts