Last week, US’s Dow Jones Industrial Average (DJIA) crossed 27,000 for the first time reaching a record high of 27,359.16 on 15 July 2019. Unfortunately, the rally did not follow through and the US index slipped amidst less-than-lustrous corporate earnings and a lack of progress for the US-China trade deal. Over the last fortnight, DJIA inched up 1 percent higher closing at 27,222.97.
As the trade war dragged on, China released its 2Q19 figures indicating that its economic growth has slowed to 6.2 percent. This was lower than the 6.4 percent expansion registered in the first quarter this year and was the weakest rate in the last 27 years. Shanghai Composite Index dipped 2.9 percent last fortnight.
Likewise, Singapore’s gross domestic products grew by a meagre 0.1 percent in the second quarter this year, widely missing economists’ forecasts and marked the weakest growth in a decade since the last recession in mid-2009. Concurrently, non-oil domestic exports slumped further by 17.3 percent in June 2019, signaling the fourth consecutive month of decline and the biggest drop in the last six years.
Weighed by the weak fundamental data announced and uncertainties around the on-going trade disputes, Straits Times Index (STI) did not manage to break new highs as per our western counterparts. The local benchmark lingered below 3,400 as investors await more clarity from the upcoming FOMC meetings on 30 and 31 July. Last fortnight, STI gained 0.3 percent to finish at 3,377.96.
After the last trade talks fell apart in May 2019, US President Donald Trump and China’s President Xi Jinping finally agreed to revive talks after speaking to each other at the G20 summit in Japan. Trump agreed to hold off from imposing the additional 25 percent tariff on $300 billion worth of Chinese goods and ease certain restrictions on tech company Huawei. As a gesture of goodwill, China agreed to make unspecified new purchases of US agricultural products.
The US-China trade ceasefire provided some much-needed relief and sent all three major US indices to close at record-high levels in a holiday-shortertened session ahead of US Independence Day. The Dow Jones Industrial Average rose 0.8 percent to close at 26,966, the S&P 500 gained 1.4 percent to 2,995.82 and the tech-rich Nasdaq Composite Index advanced one percent to 8,129.57.
Investors now turn their focus to the release of US jobs data on 5 July 2019 while hoping a weak reading would further pressure the US Federal Reserve into slashing interest rates.
Elsewhere in Asia, markets took the lead from Wall Street with Japan’s Nikkei 225 adding 2.3 percent to close at 21,746.38. Shanghai Composite Index remained flat at 3,011.06 while Hang Seng Index rose 1.1 percent to close at 28,774.83 as the trade truce overshadowed a night of historic violence that saw protesters storm the city’s legislature before being dispersed by police.
On the local front, Monetary Authority of Singapore (MAS) is considering allowing a real estate investment trusts (Reits)’ leverage to exceed 45 percent but not more than 50 percent, if the Reits havea minimum interest coverage requirement (ICR) of 2.5 times. Also in the spotlight, Capitaland will merge Ascott Residence Trust (Ascott Reit) with Ascendas Hospitality Trust (A-HTrust) to form the largest hospitality trust in Asia-Pacific and the eighth biggest globally with a total asset value of $7.6 billion. A-HTrust will become an unstapled trust and delist following the merger.
Over the fortnight, the local benchmark Straits Times Index (STI) advanced 1.4 percent to end at 3,366.81.
Asian markets turned bullish after reports surfaced that both President Trump and his Chinese counterpart Xi Jinping had agreed to meet at the G20 summit in Japan at the end of June. Meanwhile, the FOMC meeting held this week ended on a dovish note. While the Federal Reserve kept interest rates unchanged, Fed chair Powell signaled that the central bank is ready to cut rates if necessary. Investors are now hoping that a potential rate cut may come as early as July. Last fortnight, Dow Jones Industrial Average jumped 4 percent to 26,753.17.
The last two weeks have not been peaceful in Hong Kong as millions of Hong-kongers flooded the streets protesting against the extradition bill proposed by the government. On 15 June 2019, the bill was indefinitely delayed after Hong Kong leader Carrie Lam offered a personal apology to the public over her mishandling of the bill and the conflicts it had caused. The moves by Carrie Lam, however, did not manage to placate the protestors. Hang Seng Index rose 5.6 percent to close at 28,473.71 last fortnight.
Over in Singapore, exports data released by the authority recently was rather disappointing. Non-oil domestic exports (NODX) extended its decline slumping 15.9 percent in May 2019 on the back of lower electronic and non-electronic shipments. This was the worst performance since March 2016 when NODX fell 16 percent.
On local bourse, local shares closed higher led by advances by the banks and real estate counters, all thanks to the benign interest rate outlook. Last fortnight, Straits Times Index gained 4.9 percent to finish at 3,321.40.
Trade tensions further intensified between China and the US after US President Donald Trump placed Huawei on an export blacklist, a move that restricts the Chinese telecoms giant from buying parts and components supplied by American firms without the US government approval.
To retaliate against the US, China as the biggest exporter of rare earth issued veiled threats to curb the supplies of the materials to the US. Rare earth elements are a key component in smartphones, electric cars and even military equipment, any moves to squeeze the supply would have devastating impacts on manufacturers.
Ever since the last trade negotiations turned sour, there are no high-level or face-to-face meetings between China and the US. There are hopes that Trump and Chinese President Xi Jinping will meet at the G-20 summit at the end of June in Japan to jump-start the stalled negotiations.
Coming on the heels of the US-China trade war, Trump opened a new front in the trade war by announcing a five percent tariffs on all Mexican imports starting June 10 and planning to “gradually increase” the tariff every month to 25 percent by October until Mexico curbed illegal migration.
Following the fresh threats against Mexico, Trump removed preferential trade status for India beginning June 5, the second largest trading partner behind China. The preferential trade program allows developing countries to export products to the US duty-free.
Late into the fortnight, the US market recovered some of the losses after accommodative comments by US Federal Reserve Chairman Jerome Powell on June 4. Powell acknowledged the trade tensions and signaled that the Fed is willing to act if necessary to support growth.
Over the fortnight, the Dow Jones Industrial Average (DJIA) rose 0.9 percent to close at 25,720.66 while the broad-based S&P 500 added 0.8 percent to end at 2,843.49. The tech-rich Nasdaq Composite Index was flat at 7,615.55.
Meanwhile, the mood is unsettled in Asia with Hang Seng Index bearing the brunt of the losses, sliding 1.4 percent to close at 26,965.28. Shanghai Composite Index fell 0.9 percent to close at 2,827.80. Japan’s Nikkei 225 also decreased 1.1 percent to 20,884.71.
Over the local front, Singapore was added to a watch list for currency manipulation by the US as Singapore has a trade surplus of approximately US$17 billion in 2018 with the threshold currently standing at US$20 billion.
In the same period, local benchmark Straits Times Index (STI) closed lower 0.1 percent, closing firmly below the 3,200-point critical psychological level at 3,166.29.
Just when the markets were anticipating a deal to be reached between US and China, the trade negotiations unexpectedly turned sour. Early this month, US President Trump raised tariffs on US$200 billion worth of imported Chinese goods from 10 percent to 25 percent. In retaliation, China also announced plans to impose taxes on US$60 billion of US imports with effect from 1 June.
To make matters worse, the Trump administration on 16 May added Huawei Technologies to a trade blacklist, putting up restrictions to make it difficult for the Chinese phone vendor to do business with US companies. In the wake of the ban, Google revealed that it will be severing business ties with Huawei which effectively signaled the disappearance of popular services and apps such as Google Play Store, Gmail, YouTube and Chrome browser on all future versions of Huawei handsets.
The subsequent 90-day delay of the ban granted to Huawei did little help to ease investors’ concerns. Last two weeks, Dow Jones Industrial Average dipped 1.3 percent while Shanghai Composite Index sank 2.9 percent.
On local shore, the Ministry of Trade and Industry on 21 May narrowed its forecast range of Singapore’s GDP growth downward to 1.5 to 2.5 percent, a clear indication that Singapore’s economic growth for the rest of this year is likely to stay muted. This came after 1Q19 economic growth came in at 1.2 percent, the lowest growth rate in almost 10 years.
Amidst growing uncertainties and increasing downside risks, investors are turning to instruments with greater yields. Barely two weeks after the initial public offering of ARA US Hospitality Trust, the local bourse saw another hospitality trust, Eagle Hospitality Trust, ready to go public this Friday on 24 May. Last fortnight, Straits Times Index lost 3.2 percent to close at 3,169.89.
Just when global investors thought that a deal would be sealed, US President Donald Trump claimed China “broke the deal” from commitments made during earlier negotiations. Fuelled by frustration over the pace of talks, Trump threatened to escalate tariffs on US$200 billion of Chinese imports from 10 percent to 25 percent effective 10 May 2019 and would “soon” target the remaining Chinese imports with fresh tariffs.
Trump’s latest tariff threat came as a shock, coming just days after officials on two sides had sounded positive on the talks, with markets broadly expecting a trade resolution to be announced soon.
The proposed new tariff measures against China sparked a global sell-off where Shanghai shares lost 5.8 percent to close at 2,906.46 on 6 May 2019 to record its biggest one-day loss since 2016. Meanwhile, Dow Jones Industrial Average (DJIA) fell 1.8 percent to close at 25,965.09 on 7 May 2019 to register its second-biggest daily percentage drop of the year.
Attention now turns to the two-day meeting between Chinese Vice Premier Liu He and US top trade officials in Washington on 9-10 May 2019. Investors are closely watching the fresh China-US trade talk and whether the US will follow through with its threat to hike tariffs on Chinese imports.
Over the fortnight, the DJIA lost 2.4 percent to end at 25,828.36 as worries persisted over the outcome of the trade negotiations. The broad-based S&P 500 decreased 1.9 percent ending at 2,870.72, while the tech-rich Nasdaq Composite Index fell 2.6 percent to 7,910.59.
Asian markets tracked Wall Street losses with Shanghai Composite Index bearing the brunt of the losses, sliding 4.8 percent to close at 2,939.21. Hang Seng Index fell 3.6 percent to close at 28,550.24 and Nikkei 225 lost 4.1 percent to close at 21,344.92.
On the Singapore bourse, the Monetary Authority of Singapore (MAS) will be transferring excess $45 billion from the official foreign reserves (OFR) to the city-state’s sovereign wealth fund GIC to manage. As of April 2019, the OFR stood at $404 billion. MAS stated the transfer of the excess is deemed to be necessary to maintain confidence in Singapore’s exchange rate-centred monetary policy in the face of low inflation and interest rate environment.
Over the fortnight, the local benchmark Straits Times Index (STI) closed lower by 2.5 percent to end at 3,273.50.
The Dow Jones Industrial Average (DJIA) climbed to 26,656.39 on 23 April 2019 which is not too far away from the all-time high of 26,743.50 achieved in September 2018. Despite all the talks of an imminent recession, US companies continue to deliver decent results for the first quarter. Over the last two weeks, DJIA gained 1.2 percent finishing at 26,462.08 while the S&P 500 and Nasdaq Composite reached record territories before giving up some gains.
Nevertheless, the Chinese markets were quick to take profits as investors worried that the Chinese government may refocus on structural reforms instead of offering stimulus measures after it claimed better-than-expected economic growth. Last fortnight, Shanghai Composite Index slipped 3.2 percent ending at 3,086.40.
On the local bourse, Best World’s shares tumbled to a six-month low on a short-seller report, closing at $1.62 before it was halted on 24 April 2019. Short-seller Bonitas Research published a report questioning the health and wellness firm’s accounting and sales figures, alleging impropriety with regard to its China operations. Singapore Exchange’s regulatory unit SGX RegCo instructed Best World to call for a full independent review on the matters raised.
The earnings season kicked off with a good start as Keppel Corporation announced a turnaround of its offshore and marine division last quarter. The highly anticipated results from the banks are due to be released in the next one to two weeks which could to a large extent determine if the current rally may continue to run. Last two weeks, Straits Times Index rose 0.7 percent to close at 3,356.95.
US equity markets moved higher underpinned by the Federal Reserve meeting minutes which confirmed the central bank’s dovish stance without further rate hikes this year. However, before any concrete deal has been reached with China, the Trump administration declared a trade war on Europe threatening to impose new tariffs on US$11 billion of EU products from airplanes to agricultural products such as cheese and wine. Over the last two weeks, Dow Jones Industrial Average climbed 1.7 percent finishing at 26,143.05.
Meanwhile, China’s softening fiscal policies to stimulate the economy appeared to be gaining traction, as the country’s manufacturing sector returned to growth for the first time in four months. The Caixin/Markit Manufacturing Purchasing Managers’ Index in March 2019 rose to 50.8 into the expansionary region from 49.9 in February 2019. As a result, Shanghai Composite Index gained 3.2 percent to close at 3,188.63.
Brent crude oil price broke above US$70 a barrel on 5 April 2019 on the back of escalating civil tensions in Libya, sustained efforts by OPEC to cut production as well as US sanctions on Iran and Venezuela. Overall oil price had increased by almost 30 percent within the first quarter alone since the beginning of the year.
On the local bourse, OUE Group announced the proposed merger of OUE Commercial REIT (OUECR) and OUE Hospitality Trust (OUEHT) to create one of the largest diversified S-REITs with total assets up to $6.8 billion. The transaction will be effected by OUECR acquiring shares of OUEHT with a combination of cash and new units in OUECR. The enlarged REIT is expected to benefit from having an increased funding capacity, thereby enhancing its ability to deliver long-term growth through value accretive acquisitions and asset enhancement initiatives.
Last fortnight, Straits Time Index grew 3.7 percent to end at 3,331.98.
Wall Street stocks sold off sharply on 22 March 2019, with all three major US stock indexes posting their biggest one-day percentage declines since 3 January 2019. The latest sell-off was sparked off after the Federal Reserve abruptly abandoned projections for any interest rate hikes in the rest of 2019 amid signs of an economic slowdown.
Instead of cheering to the news, investors feared that the Fed’s dovish turn was a result of an impending slowdown in the US economy. Investors sold off short-term treasuries and piled on long term government bonds which usually considered higher risk. This culminated a yield curve inversion whereas US Treasury 10-year note yields dropped below three-month Treasury bill yields – for the first time since 2007. A yield curve inversion is often viewed as an indication of near-term risk or a potential harbinger of recession. Also, the inverted yield curve seemed to confirm investors’ fears of a global economic slowdown.
Meanwhile, the next possible market-moving catalyst will be the fresh China-US trade talk. Top US trade officials will visit Beijing on 28-29 March 2019 for a new round of trade talks, followed by a trip to Washington by China’s top negotiator in early April. President Donald Trump warned that US tariffs on Chinese imports could remain in place for a “substantial period” to ensure Beijing complies with a trade agreement.
Late into the fortnight, however, the US market recouped some of the losses with the Dow Jones Industrial Average ended flat at 25,717.46. The broad-based S&P 500 edged up 0.2 percent ending at 2,815.44, while the tech-rich Nasdaq Composite Index rose 0.5 percent to 7,669.17.
Meanwhile, the Shanghai composite rose 2.3 percent to 3,090.76 while the Hang Seng also closed 0.1 percent higher at 29,051.36. However, mood is unsettled in Japan, Nikkei 225 dropped 1.1 percent to 21,205.81.
On the local front, the Urban Redevelopment Authority (URA) launched its draft master plan 2019 – a blueprint that charts out the Singapore Government’s plans for land use over the next 10 to 15 years. Under its draft master plan, URA plan to add over 20,000 more homes in the central business district (CBD) and Marina Bay area so that people can live closer to their workplaces.
Over the fortnight, the local benchmark Straits Times Index (STI) gained 0.4 percent to end at 3,212.88.
Despite persistent unfavorable news from around the world, major equities benchmarks ended their downward slides and moved slightly higher. Nonfarm payrolls report from the US revealed that only 20,000 jobs were added in February 2019, signaling the slowest pace for job growth in the last 18 months. Dow Jones Industrial Average slipped 0.8 percent ending at 25,709.94 over the last two weeks.
In China, the nation concluded its annual “Two Sessions” last week with the Chinese government setting its economic growth target this year lower to between 6 percent and 6.5 percent. Nevertheless, the government planned to launch new tax cuts and spending totaling 2 trillion yuan to support businesses and stimulate the economy. Last fortnight, Shanghai Composite Index inched up 0.9 percent to 3,021.75.
In a vote on 13 March 2019, British lawmakers had rejected the idea of leaving the European Union without a Brexit deal in place. Members of the UK parliament voted again on 14 March in favor of a delay to Brexit. This means that the UK may not now leave on 29 March 2019 as previously planned.
On local front, PUB issued a default notice to Hyflux on 5 March 2019 stating that should the latter fail to fulfil its contractual obligations to keep Tuasspring operational, it would step in to terminate the agreement and take control of the plant. Meanwhile, credit rating agency Moody revised its outlook for Singtel to “negative” to reflect its weakening credit profile.
Singapore’s aviation regulator temporarily suspended operations of all Boeing 737 Max aircrafts in and out of the country, amid international concerns over their involvement in two major plane accidents within just six months apart. This would affect Singapore Airlines’ regional arm, SilkAir, which currently operates six such aircrafts.
Last fortnight, Straits Time Index dipped 0.6 percent to close at 3,200.18.