Equities Weekly: Equity markets extend previous week’s rebound

The global equity market, as represented by the MSCI AC World Index, extended its gains from the week before with a 1.35 per cent rise for the week ended June 2, 2017.

Developed market equities were met with good fortunes last week, with Japan’s Nikkei 225 Index ending the week 3.63 per cent higher, Europe’s Stoxx 600 Index rising 1.44 per cent, and the US’s S&P 500 Index rising 1.27 per cent over the week to post a new record high.

Emerging and Asian market equities, as represented by the MSCI Emerging Markets Index and the MSCI Asia ex Japan Index respectively, underperformed that of developed market equities as they recorded a 0.11 per cent and 0.85 per cent gains respectively over the week.

Amongst East Asian equities, Hong Kong’s HSI Index led with a 1.44 per cent rise over the week.

Other East Asian equities performed relatively similar to one another, with China’s offshore equities, as represented by the HSML 100 Index, as well as Taiwan’s TWSE Index each registering a 1.11 per cent and 1.12 per cent rise respectively over the week.

In Southeast Asia, equity markets’ performances were less positive compared to their East Asian peers, with Singapore’s STI and Indonesia’s JCI Index leading with a 0.94 per cent and 0.86 per cent gain over the week respectively.

Similarly, Malaysia’s KLCI Index and Thailand’s SET Index went up by 0.26 per cent and 0.15 per cent respectively over the week.

Amongst other emerging markets, India equities, as represented by the SENSEX Index, led with a 1.56 per cent gain over the week.

Brazil’s Bovespa Index fell -1.41 per cent as investors continued to be cautious since the news release last month regarding the bribery cover- up involving president Michel Temer, while Russia’s RTSI$ Index was the poorest performing of markets under our coverage, as it recorded a -2.23 per cent decline amid a greater -4.30 per cent dip (USD terms) in crude oil prices over the week.

Thailand: Exports growth likely to moderate in near term

For the month of April, Thailand’s exports grew 5.8 per cent year-on-year, easing from the prior month’s 10.8 per cent growth; while imports grew 10.1 per cent year-on-year, softer than prior month’s 22.4 per cent growth.

This resulted in a trade surplus of US$1.45 billion for the month, down from prior month’s US$2.91 billion trade surplus.

We see continued external demand for manufactured goods and electrical and electronic (E&E) products, as well as a surge in demand for aircraft, shifts, floating structures and locomotives.

Meanwhile, imports growth was driven by the demand for raw materials and intermediate goods, particularly that for construction materials.

This demand was likely fuelled by the upcoming rollout of MRT infrastructure projects that are expected to take off in the second half of 2017, and we expect this trend to continue in the coming months.

Going forward, we expect the exports growth figures to moderate gradually following the trickle-down effect from oil price, though external demand should remain robust on the back of global economic recovery.

Japan: April’s industrial production sees largest year-on-year growth since March 2014

Japan’s industrial production rose 5.7 per cent yearon-year in April 2017, up from prior month’s 3.5 per cent and was the fastest since March 2014, although it missed market expectations for a 6.1 per cent growth.

The Ministry of Economy, Trade and Industry (METI) revealed growth in the month to be largely due to the continued increase in demand for, in descending order, transport equipment; general-purpose, production and business oriented machinery; as well as electronic parts and devices.

While the METI’s Survey of Production Forecast (a monthly survey to estimate planned production output for the current and following few months) revealed industrial production to decline by -2.5 per cent on a seasonally-adjusted month-on-month basis in May, this was an improvement from the previous month’s survey which signalled industrial production to decline by -3.7 per cent in the same month.

Additionally, industrial production is expected to grow by 1.8 per cent on a seasonally-adjusted monthon-month basis in June.

It remains that the overall trend in industrial production continues to be a positive one and that further improvements in industrial production growth over the coming quarters would be unsurprising.