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Another volatile month likely for markets

This article is more than 12 months old

Investors can expect this month to be another volatile month as recession fears and geopolitical chaos swirl, according to market watchers.

The last week of March was dogged by revived concerns over the outlook for the global economy as the US yield curve inverted, stoking recession fears. While most market observers do not think a recession is on the horizon yet, they certainly see growth moderating.

"In the near term, we recommend investors to stay cautious as... we are likely to go through a soft data patch in the very near term," DBS economists Taimur Baig and Masyita Crystallin warned.

They also foresee stress arising from some emerging markets, which could spill over to Asia.

Geopolitical turmoil, which has roiled markets since late last year, will also continue to pose an overhang in the coming month - primarily from the ongoing US-China trade negotiations and the UK's Brexit conundrum.

OCBC Bank economist Howie Lee believes the US-China trade tension poses a "ready-made recession catalyst".

Mr Lee added: "If it eventually emerges as a full-blown trade war, then the odds of a US recession would have largely increased... As long as negotiations remain ongoing, it remains a wild card and should not be singled out as a recession catalyst."

In the latest development, Chinese Vice-Premier Liu He will lead his country's delegation to Washington on Wednesday to continue trade talks.

White House economic adviser Larry Kudlow said the negotiations were not "time dependent" and could be extended, adding they could take weeks or months to reach a final deal.

In the UK, British Prime Minister Theresa May's Brexit plan was voted down for a third time last Friday. Another set of non-binding votes on various Brexit options will be held in the Commons today. Meanwhile, the date for Brexit has been pushed back to April 12.

For Singapore, analysts noted that the country's real gross domestic product (GDP) growth, consumer price index and core inflation have fallen into the lower half of their official forecast ranges for this year. But equity wise, they believe Singapore remains attractively valued relative to its growth prospects.

Pockets of opportunity lie in sectors such as real estate investment trusts (Reits). DBS' Joanne Goh said Singapore Reits should enjoy a prolonged rally as the yield gap widens further versus bond yields, and dividend yields offered by the sector are "very attractive" in a low bond-yield environment.

The SGX S-Reit 20 Index of Singapore-listed Reits closed 0.2 per cent lower at 1,346.05 on Friday but has been on an uptrend year to date.

In the week ahead, data releases to watch include the official purchasing managers index for March today, which should provide insight to the health of the Singapore economy. The preliminary Q1 URA private home price index is due on the same day.

Singapore's central bank is also expected to confirm the release date of the Monetary Policy Statement (MPS) together with the advance Q1 2019 GDP estimate.

Against the current economic backdrop, the Monetary Authority of Singapore is likely to leave its exchange-rate based policy unchanged this month, pausing after two tightening moves last year.

Across the region, China's government debt will begin to be included in the Bloomberg Barclays Global Aggregate Bond Index - a development that could help shore up investor sentiment.

China and Hong Kong will take a break on April 5 for Tomb-Sweeping Day, a Chinese custom.

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