Heightened Volatility Amid Mixed Signals

Late into the fortnight, Wall Street’s advance was halted by President Trump’s plan to impose tax tariffs on steel and aluminum imports which could potentially spark a global trade war. The concerns were further intensified by the unexpected resignation of top White House economic adviser Gary Cohn who was widely regarded as having a moderating influence on the tariff proposal. Over the last two week, Dow Jones Industrial Average dipped 0.3 percent to 24,895.21 while S&P 500 Index rose 1.3 percent to 2,738.97.

China’s Premier Li Keqiang announced at the opening session of the annual National People’s Congress that the country has set its economic growth target for 2018 at 6.5 percent. Actual growth last year exceeded official target at 6.9 percent, driven by stronger performance in the property and infrastructure sectors as well as robust contribution from the trade surplus. Hence, the lower target reflected the government’s intention to focus on slower but more sustainable growth on the back of China’s economy transiting from rapid expansion to a stage of higher-quality development. Last fortnight, Shanghai Composite Index climbed 0.6 percent to 3,307.17.

Meanwhile, The China Banking Regulatory Commission issued a notice reducing the bad-loan coverage ratio to a minimum 120 percent from the previous 150 percent. This signified that regulators are comfortable with the nation’s lenders extending additional credit to support the economy’s growth. In the near term, Hong Kong market will continue to be news-driven influenced by US rate increase and southbound trades from China before setting a direction. Hang Seng Index lost 0.9 percent to close at 30,996.21.

Singapore’s Purchasing Managers’ Index came in at 52.7 in February recording the 18^th consecutive month of expansion. Nevertheless, the figure dipped 0.4 point from January, dragged lower by slower growth seen in the electronics segment in terms of factory output and new orders.

Straits Times Index exhibited greater volatility this week marked by erratic large swings in both directions. Over a two-week period, the local benchmark slid 1.3 percent to end at 3,485.57. Investors should watch out for the FOMC comments come due on 21 March for clearer indication.