Market Update 7 November 2016

November 7, 2016

Straits Times Index (STI)

STI has finally broken the support below 2800 to close at 2788.80 last Friday, after 14 weeks of sideways trading. However, we noticed higher transaction volume in the past 3 days while the index plunged lower. This might be a signal of investors “cashing out” from the stock market ahead of the Tuesday US Presidential election. Do take note of this event for the week ahead as it could be the catalyst to drive the STI in either direction this week.

Despite a local economic data released last week showing expansion in local manufacturing, we have seen some falling in profits after quarterly financial results were released by some bluechips, such as Starhub, Singapore Airline, and etc.

Telco sector used to be a dividend play in stock investment, however the lower-than-expected financial results by both Starhub and M1 could signal a weaker outlook in this sector. Furthermore, market is waiting for the winner of the 4th telco license and we think this will shake up the existing market. We shall see who will be the winner in the upcoming red ocean competition. Singtel will release their quarterly result this week.

Some other quarterly results to take note for the week: GLP, Ascendas Hospitality Trust, Far East Hospitality Trust, Capitaland, CityDev and in the transportation sector such as SBS Transit and ComfortDelGro.

Global Market

Despite strong employment data, US Dow Jones Index (DJI) has broken the strong support to close lower at 17888.28 last week. DJI has been trading above 18000 for three months in a row. The S&P 500 has broken its three months strong support to below 2100 too.

An election poll last week has surprised the market by showing Trump leading Hillary by 1%. This was after the announcement by FBI to renew the investigation into Hillary Clinton’s emails. The stock market reacted negatively when Trump took the lead.

FOMC has announced an expected dovish decision to maintain the currently low interest rates ahead of the elections this week. The employment data in October and November will be crucial to see if the FED will raise interest rate in December.

Oil price dropped last week after Iran and Iraq publicly shared their resistance to any production cuts. A report indicating an increase in the US crude oil inventory also did not help matters. We also noticed that Gold price has gone up higher last week, with an increase of more than 2%. This is a sign of defensive play by investors with all the uncertainty going around.

With the uncertainty mentioned above, the US presidential election on Tuesday remains the main focus for a bullish or bearish week ahead.

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About the author

Ng Aik Hong
Dealing Manager
Bukit Batok Dealing Team

Aik Hong is a Dealing Manager for POEMS Dealing (Bukit Batok), and currently provides dealing services to over 20,000 trading accounts. He is regularly invited to share market insights on Channel 8 “Morning Express”. He is also frequently interviewed by MediaCorp 938Live and Capital 958 radios as a market commenter. Aik Hong holds a Bachelor Degree of Mechanical Engineering, from Nanyang Technological University (NTU), Singapore.