UK polls, tepid US jobs data may boost STI in short term

LAST week's column discussed the difficulty some major indices were having in trying to breach certain key marks such as 3,500 for the Straits Times Index and 18,000 for the Dow Jones Industrial Average. As it turned out, the STI - which started the week at 3,487 - failed to regain the level and actually fell below 3,450 mid-week, while the Dow spent most of the time below 18,000 before shooting above it on Friday after the release of a so-so jobs report.

For the week ahead, we would expect attention to turn to the UK market following the surprise results of last week's general elections. British stocks and the pound started rallying on Friday and this should continue for a short while longer as near-term political uncertainty has been lifted, although there's always the spectre of a UK exit from the European Union following the Cameron government's promise to hold a national referendum on the issue in 2017.

For the local market, since the STI already jumped ahead of Wall Street's Friday rally we would expect the momentum to continue for only a short while before economic and interest rate uncertainties set in again. Those concerns are making their presence felt in the one area which has been a problem for more than a year now - liquidity.