Early part of week may see short-covering rebound

SINCE the start of the year, it has been evident that stocks in Singapore move according to foreign central bank policies, oil prices and the economic health of the US, Japan and China. In the weeks to come, European politics will also become a factor when Britain votes on whether to stay in the European Union.

This heavy dependence on external factors has been an ever-present feature of the local market for decades given the open market and economy that Singapore offers; last week, for example, the Straits Times Index (STI) was hit first by an unexpected decision by the Bank of Japan (BOJ) not to increase its monetary stimulus, a move which sent the Nikkei plunging 3.6 per cent on Thursday, then by news of below-par US GDP (gross domestic product) growth that sent Wall Street sharply lower later that day.

US newspaper Barron's on Friday reported that before the BOJ announcement, foreigners piled into Japanese equities in the expectation that the central bank would substantially boost its stock purchases.