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STI Pulls Quick Relief Effort, All Eyes Still On Job Data
The release of the jobs data tonight continues to take center stage, although it is unlikely that it will have any drastic impact on the tapering stance. However, a weak number could still raise questions on the likelihood of the US recovery this year.
A bounce back relief has finally been seen on the STI, following days of relentless plummeting as a result of fears from an emerging market sell-off.
We are in the middle of the slew of earnings releases, and defensive stocks like SIA Engineering and Singapore Post have both released their earnings results, where both saw and felt the impact of higher operating expenses.
Singapore Post achieved a 31.8 percent and 1.8 percent rise in its 9M14 turnover and earnings to $627.8 million and $112.3 million respectively, while SIA Engineering posted flattish revenue growth of 2 percent to $283.8 million for 3Q14, and a 9.7 percent dip in earnings to $60.5 million.
What Happened Over the Course of the Past 7 Days?
Singapore Market Commentary
In Singapore…
Singapore PMI Back Into Expansion Territory
Singapore’s manufacturing PMI made a surprise jump back into positive territory, coming in at 50.5. This expansion follows a slight contract (49.7) in December, and dispelled worries that the Chinese New Year might have a negative impact on the manufacturing sector.
Demand for electronics propelled the PMI into expansionary territory. Some analysts believe that protests in Thailand are sending customers to Singapore as the Thai economy has been disrupted. Economists are optimistic that the manufacturing sector will continue to expand in the months ahead.
COV For HDB Hits New Low
The cash-over-valuation (COV) for HDB flats has fallen to a new low of only $3,000. This marks a $2,000 dollar decline from December and suggests that home sales are flat. The median COV is now on par with the all-time lows set during June 2009, when the world economy was being rocked by the financial crisis.
Singapore real estate’s flash estimates showed eight out of 28 HDB towns saw zero or negative median COV. A negative COV means that a flat is sold for less than what it is worth.
Singapore Shares Rise Ahead of U.S. Jobs Data
Singapore’s shares rose Thursday, ahead of the release of U.S. jobs data reports. The Strait Times Index was able to snap a five day losing streak and record a one percent gain, rising 28.8 points to settle at 2988.27. The banking sector showed particular strength with several banks recording strong gains.
Shares across Asia also recorded solid gains. This follows several days of losses due to fears of an emerging market sell off as the United States continues forward with its tapering program. Fears appear to be subsiding and markets may be adjusting.
Bright Economic Prospects Will Drive Real Estate Investments
Increased investment and business expansion will fuel demand for office space in Singapore. Rent prices for commercial real estate are projected to increase more than four percent this year due to a low supply pipeline, while investments in hotels should rise.
Asia as a whole should see rising rent prices as the regional economy continues to expand. Across the region, investments in hotels marked a landmark year for the Asia Pacific hotel market, and expanded to US$9.5 billion in 2013, while demand for retail space continues to rise. Growth in the warehouse and storage sector will remain constrained as companies look to cut costs.
Around the World…
Japanese and Chinese Companies Open Year With Surging M&A Activities
Japanese and Chinese firms are starting the year with a bang, pushing the M&A sector for the Asia-Pacific region to an all-time high for the month of January. M&A volumes rose to US$67.2 billion, marking a 60 percent increase from a year earlier.
Japanese and Chinese firms have been leading the surge in investment and showing a particular appetite for US. assets. So far, South East Asian investors have been largely absent following a strong year of mergers and acquisitions in 2013.
US Economy to Grow But Unemployment Will Remain High
The Congressional Budget Office (CBO) is projecting the U.S. economy to grow by a solid 3.1 percent this year. Economic growth will be driven by housing construction and business investment. The CBO also projects economic growth to rise to 3.4 percent over the following two years as the recovery gains momentum.
Unfortunately, rising economic growth may not translate to more jobs. The CBO projects the unemployment rate remain unchanged at 6.7 percent for the year. The CBO believes that the unemployment rate will not fall below six percent until 2017. High unemployment may constrain growth and make investors nervous.
Wall Street Rallies On US Jobs Data
U.S. stock indices saw their biggest gains of the year as a drop in applications for unemployment insurance boosted confidence in the economy. Declining unemployment is stoking investor confidence. Both the Dow and the S&P 500 posted gains of about 1.2 percent, while the Nasdaq recorded a 1.1 percent gain.
Applications for unemployment declined by 20,000 to a seasonally adjusted 331,000. Following fears of a slowdown in the United States and China, and sell offs across emerging markets, many traders have been growing increasingly pessimistic. Many indices are still in the red for the year, however, after weeks of decline.
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