ST Index gains for first time this week

THE main distinguishing feature of Thursday's session was a play on food and beverage (F&B) stocks that pushed up Yeo Hiap Seng, Thai Beverage, Jumbo Group and Sino Grandness Food. Otherwise, turnover at 1.2 billion units worth S$731 million was 63 per cent lower than Tuesday's S$2 billion, although the latter was admittedly inflated by window-dressing of key blue chips (or "portfolio rebalancing").

Next week's US Federal Open Market Committee meeting could provide a short-term trading opportunity, though observers are uncertain as to whether a rate hike would be good or bad for stocks.

If the Federal Reserve raises rates, it could signal confidence in the economic recovery that then helps drive stocks. If it doesn't, markets could still rally as it gives risk assets a few more weeks' breathing space.

With investors unsure of what the Fed might do, the Straits Times Index spent Thursday locked in a narrow range, tracking movements in several external markets, mainly the Dow futures and Hong Kong, before ending 4.55 points higher at 2,795.09, its first rise this week. Excluding warrants, there were 191 rises versus 173 falls.

The continued rise in shares of F&B firm Yeo Hiap Seng caught the eye, this time when it rose S$0.075 to S$1.56 on volume of 464,400. In two days, the stock has risen S$0.25 or 19 per cent, presumably on privatisation hopes. The company was queried on Wednesday by the Singapore Exchange (SGX) and replied that it did not know of reasons why its shares were rising.

Elsewhere in the same sector, shares of seafood restaurant operator Jumbo Group stood out with a S$0.015 rise to S$0.57 and Sino Grandness surged S$0.065 or 9.4 per cent to S$0.76 on volume of 17.5 million.

Real estate firm Cedar Strategic was the day's most active stock for the second successive day, with a S$0.001 rise to S$0.003 on turnover of 440.6 million.

ABN Amro in its June 2 Global Daily Insight said there are reasons to think that global manufacturing and the world economy more generally will see a moderate improvement over the next months.

"A number of factors that drove the soft patch in global growth have improved, though they may take some time to gain some traction. For instance, financial conditions have clearly eased, helped by an upturn in investor sentiment following reflation efforts by central banks," said ABN.

"Capital has started to flow back into emerging markets over the last few months after sharp outflows previously. Finally, oil prices have recovered, which should help alleviate some of the stress that the previous low levels were causing for producers."

In contrast, BlackRock's global chief investment strategist Richard Turnill in his May 31 "Time for Caution" report said BlackRock has downngraded global equities to neutral as the growing likelihood of an imminent Fed rate increase and more elevated US valuations warrant short-term caution.

"Equities no longer look cheap. The MSCI World Index is up 14 per cent from its mid-February low, as stocks have shaken off fears of a global recession, an oil-price collapse and a Chinese currency devaluation," said Mr Turnill.

"US equity valuations sit around the 70th percentile of their long-term historical range, according to our calculations. And stocks overall appear more vulnerable to short-term risks. These include a Fed that increases rates too aggressively, a Brexit, a worsening European immigration crisis and a slowdown in global growth."

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