Market Update 26 September 2016 September 28, 2016

Straits Times Index (STI)

The Straits times Index (STI) closed 26.28 points higher, or 0.38 percent to 2,856.95 last week, compared to an opening of 2,830.67 on the 19th of September. The year to date performance of the STI is not as positive, as performance is down by approximately 32.28 points, or 1.1 percent, from the year opening of 2889.23. There was little to drive investor sentiment in the local market last week, even as the Federal Reserve announced that they will not proceed with an interest rate hike in September.

The Great Debate (Round 1)

This will be an exciting week for investors, as the world will be watching the first of the three presidential debates take place on Monday, September 26. All eyes are set on the first debate, as candidates Hillary Clinton and Donald Trump, backed by the Democrats and Republicans respectively, show increasingly close popularity percentages in recent United States (US) polls.

Source: Bloomberg

Source: Bloomberg

The incoming President would set forth changes that would inadvertently affect trading relations between the US and its partners. Apart from this, various sectors will also be impacted by the election of a new President.

Impact on Energy Sector

The Energy sector will likely experience near term volatility depending on which candidate succeeds as the new President. Donald Trump is known to be bias towards traditional energy sources, and have raised interest in investing more on coal, as well as approving more contracts for Crude oil drilling in the USA.
Hillary Clinton is known to be more of an advocate of eco – friendly initiatives, and prefers renewable energy over other traditional sources of energy. Hillary Clinton has pledged to push through a proposal to generate approximately 700% increase in solar capacity by the year 2020, in the event that she assumes the role of the new President.

Impact on Defence Sector

Both leading candidates have brought up the issue about national security on multiple occasions. With prevailing internal threats of terrorism, existing involvement of US military presence in the Middle East, rising tensions between the US and Russia over Syria, as well as opposing positions adopted by the US and China over the South China Sea disputes, we will likely see the successful candidate maintain or even increase defence spending.

Impact on Healthcare Sector

The cost of rising healthcare in the USA has been mentioned more than once during Hillary Clinton’s road to nomination. More than once have Hillary Clinton called out to companies on exorbitant pricing imposed on drugs and life supporting devices. Hillary Clinton is looking at increasing, or at least maintaining the Affordable Care Act, or better known as Obamacare in current times. Donald Trump is looking at repealing the Act. Both candidates do see the need to keep drug costs down, in order to make healthcare more affordable for the average American.
The US presidential election will be held on November 8, 2016.
Investors who are interested in gaining exposure to the mentioned sectors can consider wide ranging list of ETFs offered, such as Energy Select Sector SPDR Fund (symbol: XLE) for energy, IShares U.S Aerospace & Defence ETF (symbol: ITA) for defence, Health Care Select Sector SPDR (symbol: XLV) for healthcare.

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About the author

Kervin Ong
POEMS Dealer
Jurong West Dealing Team

Kervin Ong currently manages a portfolio of trading accounts and is part of the POEMS Dealing Team. Apart from his Dealing role, he also gives training seminars to further enrich his clients’ financial knowledge under his care.

An external auditor by profession before joining Phillip Securities, his background in due diligence and statutory audits for listed companies equips him with in-depth analytical skills; a skill hugely advantageous for value investors who seek to invest in companies with favorable valuations or shrewd management.

Kervin holds a Bachelor of Science in Applied Accounting (Hons) from the Oxford Brookes University, along with memberships under the Association of Chartered Certified Accountants (ACCA) and Institute of Singapore Chartered Accountants (ISCA).