The privatisation frenzy among Singapore-listed companies including Global Logistic Properties (GLP), and United Engineers fuelled the local stock market with the benchmark Straits Times Index (STI) ended 8.49 points higher to 2,962.63 by the end of the regular trading hours on Friday, January 06, 2017. This brings the overall year-to-date performance to 2.77 per cent or a total of 81.87 points for the 4-day trading week. Not a bad start to 2017 given the various economic uncertainties, and lingering concerns on the timing of US Federal Reserve’s interest rate hikes. The bullish start is a sharp contrast to the first three trading sessions in 2016 when the STI plunged 78 points, or 2.7 per cent to 2,804, prompting many traders to decipher when will be the end of the market false start.
The STI soared all week since the start of 2017 ending at 2,962.63. The index broke the 50-day, 100-day, and 200-day moving averages (MA) at 2,920.63, 2,871.64, and 2,860.50 respectively. The last peak was on December 08, 2016 when STI ended the day at 2,980.77.
Looking at the chart pattern, we believe that surpassing the last peak of 2,980.77 might be challenging given the uncertainties over the upcoming earnings season in Singapore, the continued fallout of the oil and gas (O&G) sector, news of various job losses, and global economic worries, among others.
At the current levels, we would be selective in our stock picks, making sure the stock names have earnings sustainability, strong free cash flows, minimal debt, and resilient business models that will minimise exposure to market volatilities. We expect the months ahead to be rough, and we are sticking to our STI target range of 2,800 to 2,900 until the end of 1H2017, unless things changed drastically.
S&P 500 roundup
The S&P 500 stock index climbed by 7.98 points on an intraday basis to close at 2,276.98 on January 05, 2017. The trading week was focused on minutes from the December 13 – 14 2016 US Federal Reserve meeting which provided some hawkish hints on Fed policy makers to move quickly on the interest hikes this year in order to keep pace with the rising cost environment. By the week’s close to the release of a slower than expected jobs report on Friday, the index was up by 1.3 per cent on a weekly basis.
With two weeks to go before President-elect Donald Trump officially assumes the US presidency, financial markets will be keenly focused on key policies impacting future economic performance in US including infrastructure spending plans, onshoring of US multinationals, repealing of the Affordable Care Act, and lowering taxes, among others. However, markets are also increasingly concerned that the nationalistic policies including the possible singling out China as currency manipulator, the exit of any major role by the US in free trade deals like the Trans Pacific Partnership (TPP) agreement, and pressures levied on US multinationals to keep jobs in the home country might inhibit trade growth, thus penalising US consumers in the form of higher prices of foreign imports like clothing, toys, and electronic goods.
Based on the one-year daily chart of S&P 500 Index, it appeared that the index is encountering a resistance level of 2,350. If the resistance level is not achieved, we think that the next support level is 2,202.19 on the 50-day MA. If it breaks through the 2,200 level, we think that there could be some form of market intervention to stem the free fall.
Roundup of Hang Seng Index
For the Hang Seng Index (HSI), we think that the index is intrinsically tied to economic events in China. On the first week of 2017, the Chinese Renminbi currency went through a roller coaster ride when the Chinese government tried to fix the currency higher which caused the offshore renminbi or the CNH to rise by as much as 2.5 per cent to 6.7853 against the US Dollar. The intervention came after a year of capital outflows from the country in view of the economic slowdown and the capital flight to quality to places such as the United States.
Looking at the chart above, the HSI has also underwent a gradual decline since September 2016, and is last traded at 22,503.01, up 46.32 points or 0.21 per cent at the market close on January 06, 2017. We think that there is still room for a downturn, given how the 50-day MA is trending downwards. The 50-day MA is currently at 22,250.19. If it fails to break the 50-day MA, the HSI index could fall and will next test the 21,898.86 support level. This support level is also the 200-day MA.
How am I investing
The virtual portfolio was created at the end of November 2016, and the initial capital was S$100,000. I have added four new stocks, namely Singtel, Dairy Farm, SATS Ltd, and PNE Industries in the beginning of this year.
Since then, the portfolio has rose by 1.06 per cent on a weekly basis since January 03, 2017. In view of the upcoming earnings season, I will be monitoring closely at the market, and will be selective in my stock picks. Do tune in for more insights.
Disclaimer: The views/analyses expressed by the author in this article are based on public information sources, and individual analyses. Investors seeking to trade in the stocks mentioned in this article are advised to seek the opinions from licensed financial advisers.