Rate hike fears and main­land China slow­down may hit Sin­ga­pore in­dex


The grow­ing like­li­hood of a rate hike next month cou­pled with fears of a deep­en­ing Chi­nese eco­nomic slow­down are ex­pected to weigh on Sin­ga­pore shares this week.

Mar­ket sen­ti­ment will also be driven by the sec­ond- quar­ter earn­ings of sev­eral key Straits Times In­dex (STI) con­stituents, in­clud­ing com­modi­ties trader Noble Group, which re­leases its re­sults to­day.

In­vestors are also ex­pected to keep a close tab on the re­sults of other com­mod­ity plays such as Golden Agri- Re­sources and Olam In­ter­na­tional, which will post their fi­nan­cial state­ments on Thurs­day and Fri­day re­spec­tively.

“The com­modi­ties mar­ket suf­fered a rout re­cently,” said remisier Alvin Yong.

“In­vestors are still look­ing for clues if these (com­modi­ties com­pa­nies) can sus­tain earn­ings in a weak en­vi­ron­ment.”

Plung­ing com­mod­ity prices have taken their toll on agribusi­ness group Wil­mar In­ter­na­tional’s sec­ond- quar­ter earn­ings, which came in slightly be­low forecast.

It re­ported last week that its rev­enue for the quar­ter was 11.7 per­cent lower at US$9.28 bil­lion due to lower com­mod­ity prices, but gross mar­gin inched up to 7.7 per­cent from 7.4 per­cent.

Wil­mar posted an 18.2 per­cent rise in net profit to US$201.8 mil­lion de­spite lower rev­enue and a higher share of as­so­ci­ates’ losses.

OCBC In­vest­ment Re­search main­tained a “buy” call on the counter.

It noted: “Wil­mar be­lieves it has achieved ‘sat­is­fac­tory’ re­sults in the sec­ond quar­ter de­spite the tough con­di­tions and lower CPO (crude palm oil) prices. It is also cau­tiously op­ti­mistic that the sec­ond half-year per­for­mance will be sat­is­fac­tory.”

Other in­di­ca­tors that will be closely watched are Sin­ga­pore’s sec­ond- quar­ter gross do­mes­tic prod­uct num­bers, which are due out to­mor­row, and re­tail sales data, sched­uled for re­lease on Fri­day.

Casino op­er­a­tor Gent­ing Sin­ga­pore, which will re­port its re­sults on Thurs­day, will also in­flu­ence how the STI fares.

“Gent­ing will give us an idea if the sus­tained tourist num­bers are trans­lat­ing into earn­ings for the hos­pi­tal­ity sec­tor,” Yong said.

“If Noble, Olam and Singtel (which posts its first-quar­ter re­sults on Thurs­day) sur­prise on the up­side, the in­dex could main­tain or re­cap­ture the 3,280 level,” he said.

“But if they post worse-thanex­pected earn­ings, that will weigh on the in­dex un­less, of course, China an­nounces a mas­sive stim­u­lus plan this week.”

The STI ended last week at 3,196.66 points. Traders are watch­ing for fur­ther stim­u­lus moves from China af­ter its July ex­ports de­clined more than ex­pected, hurt by a strong yuan and weaker de­mand from the Euro­pean Union.

Over­seas ship­ments fell 8.3 per­cent from a year ear­lier, the Chi­nese Cus­toms ad­min­is­tra­tion said over the week­end.

The read­ing was well be­low the es­ti­mate for a 1.5 per­cent de­cline in a Bloomberg sur­vey and com­pared with an in­crease of 2.8 per­cent in June.

Im­ports dropped 8.1 per­cent, widen­ing from a 6.6 per­cent de­crease in June, leav­ing a trade sur­plus of US$43 bil­lion.

It came de­spite a few bright spots, in­clud­ing the high­est monthly steel ex­ports since Jan­uary.

Along with weak do­mes­tic in­vest­ment, sub­dued global de­mand is putting China’s growth tar­get of about 7 per­cent this year at risk.

The gov­ern­ment has rolled out pro-ex­pan­sion mea­sures, in­clud­ing spe­cial bond sales to fi­nance con­struc­tion, but has held off weak­en­ing the yuan.

Another fac­tor that may im­pact the Sin­ga­pore mar­ket is the re­lent­less strength­en­ing of the U.S. dol­lar against most Asian cur­ren­cies, in­clud­ing the Sin­ga­pore dol­lar, as con­tin­ued growth in the United States jobs mar­ket raised the like­li­hood of a rate hike by next month.

U.S. La­bor Depart­ment data showed em­ploy­ers added 215,000 work­ers last month.

Re­vi­sions showed em­ploy­ers added 6,000 more jobs in May and 8,000 more in June than pre­vi­ously es­ti­mated.

The un­em­ploy­ment rate held steady at 5.3 per­cent last month.

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