STI regains 3,000 level despite weak Wall St

THE Straits Times Index enjoyed a sixth consecutive rise on Tuesday, gaining 24.48 points to 3,006.02, making it the first time since early November 2015 that it closed above 3,000.

Turnover, which dipped below S$1 billion on Monday, amounted to 1.9 billion units worth S$1.3 billion, though the advance-decline score of 256-201 suggested the index's gain was not broad-based.

The last time the STI saw the 3,000 level was on Nov 4, 2015 when it ended at 3,039. It stayed above 3,000 for only three days then and until Tuesday had not managed to regain that level.

The index's 14-month high came despite a weak overnight Wall Street, a sharp fall in oil prices and a soft Tuesday for the Dow futures that suggested the US market may have to wait a little longer to see the Dow Jones Industrial Average close above 20,000 for the first time.

Brokers noted that US equities have traded in a tight range for the past 2-3 weeks, with the Dow nearing but not quite managing the break through 20,000 several times.

"It could be that the market there has realised that it ran up prematurely because nobody knows what the new president's policies will be," said a dealer. "So until there's greater clarity, it looks like trading sideways for now."

Here, much of the support for the STI over the past year has come from the banks, though this was less so on Tuesday when gains in the three added a total of just eight points to the index.

Among the other big index gainers was Global Logistic Properties, which has announced it is in takeover talks. The stock added S$0.08 to S$2.55 on volume of 33 million.

"Although the STI's rise has not been that broad-based, it has helped firm up sentiment in the market," said a broker. "It's not great but at least it's something."

Bank of America-Merrill Lynch, in its Jan 9 "US Rates - Awaiting Fiscal Clarity", said that US rates should modestly increase over the course of 2017 due to the expected impact from stronger growth and higher deficits and most of the move higher should be front-loaded in the first half of the year.

"Risks to our near-term outlook for higher interest rates include:

DBS chief investment officer Lim Say Boon in his latest Investment Insights said that while the current US economic momentum and the promise of greater policy support is positive for equities, this is also coming at a time when the US economy is close to full capacity.

"Should inflationary pressure accelerate from here, it could trigger a more hawkish response from the US Federal Reserve. And aggressive monetary tightening in this part of the cycle could well be the proverbial straw that breaks the camel's back," said Mr Lim.

Bank of Singapore chief investment officer Johan Jooste in his Jan 10 "Themes to start 2017" said that compared to the last few years, investors should anticipate a greater degree of market volatility in 2017.

"A far greater number of policy outcomes are possible this year, as Mr Trump looks to introduce policy changes that had not been contemplated before. This alone is probably enough to spur market swings," said Mr Jooste, adding that portfolio diversification will be crucial this year.

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