Markets look beyond US Capitol unrest to expected stimulus

Singapore

SINGAPORE and regional stocks marched forward on Thursday, taking their cue from the US Democrats' Senate win, brushing aside the storming of Capitol Hill in the US.

The benchmark Straits Times Index (STI) rose 1.5 per cent or 43.96 points to close at 2,906.97, its highest in more than 10 months.

Simultaneous gains were made across much of the Asia-Pacific, with Japan, South Korea and Australia stocks advancing to track big overnight jumps by the major indices on Wall Street, where investors largely shrugged off the unrest in Washington DC.

On Thursday morning New York time, the Dow performed an encore, surging over 300 points in just the first hour of trading.

Earlier, the Democrats picked up two seats in the Georgia Senate runoff elections, taking the chamber to a 50-50 tie between them and the Republicans. With the chamber evenly split, Democratic Vice-President elect Kamala Harris will play the role of the tie-breaker, delivering to the Democrats control of the Senate as well as the House of Representatives.

Stephen Innes, chief global market strategist at Axi, told The Business Times: "The political unrest in the US Capitol is but a tempest in a teapot and will be forgotten about after inauguration day."

"The Democratic sweep is very positive from a stimulus perspective and when complemented by (president-elect Joe) Biden's plan for a speedy vaccine rollout, it's hugely positive for Asia risk." He noted that the stimulus coupled with vaccines should favour a rotation from tech to cyclical counters and financial heavyweights on the Singapore Exchange.

The trio of local banks were among the strongest gainers on the index on Thursday. DBS shares rose 3.5 per cent or S$0.87 to close at S$26.05. UOB was up 2.8 per cent or S$0.64 to S$23.20, while OCBC increased 2.3 per cent or S$0.23 to S$10.32.

IG senior market strategist Pan Jingyi told BT the democratic sweep and expectations of near-term fiscal injection was likely the key driver of gains on Thursday. She added that higher yields in the US markets were also helping to lift the share price of the three Singapore banks.

The top performer on the index was Singtel, which climbed 4.3 per cent or S$0.10 to S$2.40. Other index stocks that also gained by over 2 per cent included Yangzijiang Shipbuilding. Yeo Kee Yan, analyst at DBS Group Research, said in a note that the democratic sweep could be positive for China manufacturing counters such as Yangzijiang, as the new administration is likely to be against unilateral tariffs.

Elsewhere in the region, the Nikkei 225 index in Japan closed 1.6 per cent higher at 27,490.13, touching a 30-year peak during the session, powered by financial companies. In Australia, shares rose by their most in nearly two months on Thursday, with the ASX 200 up 1.6 per cent to 6,712 points. The KOSPI in Korea ended at a record high on Thursday, up 2.1 per cent to 3,031.68.

An exception on Thursday was Hong Kong's Hang Seng index, which fell 0.5 per cent to 27,548.52, after the New York Stock Exchange made another U-turn to delist China telecom firms. There were also reports US officials were considering barring investments in Alibaba and Tencent.

Ms Pan noted that US-China tensions have not totally gone away, and it remains to be seen how the incoming administration would handle relations between the two largest economies in the world.

However, she added that the broad trend this year could be better performances by many value stocks in sectors such as industrials, materials and financials. "What we have witnessed today is just a small step in it," she said. "The general trend is we are still expecting vaccine distribution to be the case, and that could really help see gains for these stocks, which have lagged tech stocks."

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