Dow passes 24,000, giving positive lead to Singapore

Singapore

THE Dow Jones Industrial Average closed above 24,000 for the first time on Thursday; the Standard & Poor's 500 Index also hit a fresh record, as a United States tax-reform plan moved closer to passage.

Many analysts believe there is still room for US stocks to rise if the tax bill becomes law.

It has been making steady headway in the US Congress. The Senate, seen as the more challenging branch of Congress, voted on Wednesday to formally launch a debate on the bill, which keeps it on track to potentially be signed by US President Donald Trump by the end of the year.

IG market strategist Pan Jingyi wrote in a note on Friday: "Tax talks ushered in broad-based gains for US equities, with the news that a key Republican senator has aligned with the tax plan among others, shrugging off even negative developments on the politics end. The dispelling of earlier speculations surrounding Senator John McCain's position had certainly been a boost for markets."

The positive lead from Wall Street could provide a continued boost to the Singapore market, which is also buoyed by strong corporate earnings.

A DBS analyst report on Monday noted: "The synchronised global recovery will continue to drive economic growth in this region. Singapore, a small and open economy, was an early beneficiary of this recovery since end-2016.

"We believe this turn is powerful, and will continue to drive a more sustainable earnings growth going forward."

The improvement in Singapore's real economy will broaden from the manufacturing sector to the rest of the economy next year, while the U-shaped recovery in the services sector, which accounts for two-thirds of gross domestic product, is gaining strength, the analysts noted.

DBS expects the Straits Times Index (STI) to hit 3,688 by year-end, up 6.9 per cent from Friday's close of 3,449.54.

Banking shares have done well, including DBS. DBS Group's market cap has surged to S$62.64 billion, overtaking SingTel as the highest-valued primary-listed stock in Singapore as at Nov 30.

Meanwhile, UOB Kay Hian has a 2018 target of 3,530 for the STI, but said it has room to reach as high as 3,730 if there are more earnings upgrades among listed companies.

The analysts wrote in a note: "Our themes for the first half of 2018 include multi-year growth drivers, reflation picks, quality laggards and stocks with earnings surprises or specific catalysts."

Meanwhile, Maybank Kim Eng analysts have a more modest end-2018 forecast of 3,497. "Key downside risks to our outlook for the current rally to extend through 2018 are external growth and/or trade headwinds that derail industrial production and the tech capex upcycle, potential measures to cool the property market amid rebounding physical prices and en bloc activity and material portfolio fund outflows from Asean to North Asia."