Market Update 19 September 2016 September 19, 2016

This week’s focus

Some key events happening this week will be Bank of Japan (BOJ) press conference on Wednesday and the Federal Open Market Committee (FOMC) meeting on Tuesday and Wednesday (FOMC statement will be released at Thursday 2am, Singapore time).

BOJ press conference will shed some light on the effectiveness of the BOJ’s policy measures to date, which will determine the monetary policy for BOJ, moving forward.

With the U.S. economic data this year showing signs of U.S. economy recovery, the Federal Reserve is running out of excuses for delaying a rate hike.

However, with the upcoming U.S. presidential election in early November and slower than expected jobs growth data in August (151k in actual vs 180k in consensus), FOMC is likely to hold the interest rate steady till the end of the year.

US non farm payroll

Straits Time Index (STI)

Last week, STI index traded in between 2847.50 and 2791.38 points in a short trading week due to Hari Raya Haji. STI was relatively volatile, opening last week with a drastic gap down because of heavy selling on the US market on the last trading day (09/09/2016) 2 weeks before, this persisted for the rest of the week. However, on Friday, STI recovered strongly and managed to close at 2,827.45 on Friday. STI is down 45.88 points, or approximately 1.6% for last week.

STI is expected to trade flat the next 2 days as investors are on “risk-off mode” sitting on the sideline awaiting announcements from BOJ and FOMC.

Oil Market

As mentioned on previous market update in late August, crude oil price retraced when it reached estimated USD $50 per barrel. Since then it has struggled to regain the upward momentum.

WTI Crude oil price closed at US$43.03 per barrel on Friday, 16/09/2016.

On Sunday, 18/09/2016, Venezuelan (Venezula is the country with the largest proven oil reserves) President Nicolas Maduro said that a deal between OPEC and non-OPEC countries could be announced this month.

On the same day, there was a report on clashes in Libya, which halted the loading of the first oil cargo from Ras Lanuf in close to two years. This raised concerns of a new conflict over Libya’s oil resources.

In my personal opinion, both news should act as a positive catalyst in fueling the upward momentum of oil prices.

UCO pricing chart:

Source: POEMS 2.0

Source: POEMS 2.0

Investors may want to consider looking at positive price co-related oil ETFs like United States Oil Fund (USO) or Proshares Ultra Bloomberg Crude (UCO) if they wish to ride the oil price rally.

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About the author

Chong Kai Xiang (Kai)
POEMS Dealer
Raffles City Dealing Team

Chong Kai Xiang (Kai) is an Equities Dealer in the Raffles City Dealing Team, and currently provides dealing services to over 35,000 trading accounts.

Kai frequently conducts seminars to enrich his client’s trading and financial knowledge. Apart from this, Kai also provides weekly market updates to his clients to keep them informed and up to date on their stock holdings.

Kai holds a Bachelor Degree of Finance from the SIM University – UniSIM and was awarded the CFA Singapore Gold Award and CFP® Certification Achievement Award in 2015.