SINGAPORE: Expectations that the European Central Bank (ECB) would extend its stimulus programme, along with record high closes on Wall Street and encouraging economic data out of China, have helped boost market sentiment in Singapore.
But Singapore's benchmark Straits Times Index (STI) closed on a negative note on Friday (Dec 30), its last day of trade. It ended down 0.3 per cent at 2,880.76 points – but gained 0.2 per cent for the entire year.
“We’re really seeing that kind of seasonal December/January effect coming in,” said Jingyi Pan, market strategist at CFD and forex provider, IG. “The S&P has picked up by some 4.7 per cent, the market right now is riding on that kind of positive sentiment.
“Initially, there were some concerns with President-elect Donald Trump’s policies in terms of how it’s going to affect the US and China trade relations.”
Ms Pan added that the financial sector had been the main driver of the index this year: "What overwhelms the market sentiment is the Fed hike - the rise in interest rates is going to transpire through to Singapore and that’s been raising the outlook for the banking sector because people are going to expect earnings to increase from there."
However, another market watcher said the rate hikes are far from good news for one of the drags within the index. "The property sector is a bit depressed right now," said Stephen Innes, senior trader at OANDA, a Canadian-based foreign exchange company. "There are lots of condos coming back onto the market again, so this could be a supply drag, because we're not seeing the same amount of demand for new projects."
The observers said that the telco sector has under-performed as well, in the face of a new fourth carrier that will give the incumbents a run for their market share.
BRIGHT SPOTS AHEAD?
Looking ahead, both Ms Pan and Mr Innes said that any push in the STI could be capped at about 3,300 points.
They cited the backdrop of weak global economic growth and political uncertainty, warning that downside risks like upcoming elections in Europe as well as protectionist policies will sap risk appetite.
Said Mr Innes: "Is China's economy going to continue showing signs of life or is it going to revert back to a slowdown? If we saw more demand coming out of China for Singapore's exported goods, then I think that will weigh positively on a lot of the underbelly of the Singapore markets."
Mr Innes did, however see some bright spots amidst the doom and gloom.
"Longer-term growth stocks have a relatively high dividend yield, and are still going to be attractive for the average consumer and I think the other area we have to look at is the move to privatisation,” he said. “This could be something for investors to look at – to wisely position themselves in certain areas on anticipation of this privatisation.”