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Focus to stay on corporate earnings

This article is more than 12 months old

In the local market, the corporate earnings season will continue to hog the limelight this week, with data releases on the periphery.

Singapore's Straits Times Index (STI) ended on Friday at 3,261.11, down 30.64 points (0.9 per cent) and shedding 102.65 points (3.05 per cent) over the past week.

Much of the benchmark index's performance last week was down to profits being booked ahead of the US Federal Reserve's rate cut decision, which saw the STI dip 1.5 per cent last Wednesday.

The next two days saw the STI post further losses as investors globally took US Federal Reserve chair Jerome Powell's statement following the quarter-point cut as hawkish, as well as US President Donald Trump's surprise move to slap yet another 10 per cent tariff on US$300 billion (S$413 billion) worth of Chinese goods from Sept 1.

With his latest salvo, essentially all Chinese exports to the US will face import duties.

Most STI components have already reported earnings for the April-June period. That said, this week will see four more companies post earnings, starting with Yangzijiang Shipbuilding on Wednesday. On Thursday, Singtel, Venture Corp and City Developments will report earnings, ahead of Friday's National Day break.

The Singapore economic docket is fairly empty, with just July's Nikkei Purchasing Managers' Index (PMI) figures today and retail sales for June on Thursday.

With August a traditionally weak month for the STI, DBS Equity Research expects the blue-chip index to trade in the 3,245 to 3,275 range.

"We observed that the Singapore market tends to peak in late-July, falling through August before bottoming in early-September," DBS analysts Yeo Kee Yan and Janice Chua said.

As such, the bank has adopted a risk-off stance for this month, preferring stocks with high dividend yield and earnings visibility like ST Engineering, Sheng Siong and Koufu.

With growth uncertainty, the trade escalation between the United States and China, and global dovish actions by central banks, Standard Chartered Bank economists are of the view that such conditions may prompt the Monetary Authority of Singapore (MAS) to ease its monetary policy in October.

"We expect the central bank to ease the Singapore dollar nominal effective exchange rate (S$NEER) band slope slightly by 50 basis points to +0.5 per cent a year. We do not expect the MAS to adjust the centre or width of the S$NEER policy band," StanChart said.

Asian investors will also be looking to China's monthly data dump. The Caixin services PMI for July, which focuses more on smaller and medium-size firms, is out today.

The private sector reading for manufacturing, released last Thursday, beat street expectations though it remained in contraction territory.

China's trade data for July will be released on Thursday, and inflation data for the same month on Friday.

Of the lot, ING Asia economist Prakash Sakpal noted that China's trade figures for July "will be under the most scrutiny as we try to gauge the impact of trade wars".

FXTM market analyst Han Tan noted: "Signs of a steeper slowdown in the Chinese economy are likely to fuel risk-off sentiment and could have a weakening effect on regional assets."

Elsewhere in Asia-Pacific, central banks in Australia, India, New Zealand, the Philippines and Thailand have policy meetings this week.

Among other economic data releases this week, there will be some focus on the Philippines and Taiwan. Both will release July's inflation data tomorrow and trade data on Wednesday. The Philippines will also report second-quarter gross domestic product figures on Thursday.

Meanwhile, Malaysia and India will release industrial production figures for June on Friday.

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