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Risk-on attitude returns

This article is more than 12 months old

STI rises 49.44 points, or 1.5%, over news of upcoming 'extended meeting' between Trump and Xi

Judging from recent sessions, most investors seem sold into thinking that rate cuts by the US Federal Reserve are a certainty.

With news that US President Donald Trump and his Chinese counterpart Xi Jinping are set for an "extended meeting" at the G-20 summit, and dovishness from other central banks added to the mix, risk-on attitudes returned to the fore.

Buoyed by the sentiment, Singapore's Straits Times Index (STI) closed at 3,288.17, rising 49.44 points or 1.5 per cent.

"Investors are in a euphoric state of mind as easing of US-China trade tensions, fused with the anticipation for the Federal Reserve Board to define an overtly dovish tone, have equity markets surging in Asia," wrote Vanguard Markets managing partner Stephen Innes.

Such moods, CMC Markets analyst Margaret Yang said, "led to an extension of relief rebound in Singapore equity market, which has largely outperformed its regional peers since early June".

It was more of the same elsewhere in the region as Australia, China, Hong Kong, Japan, Malaysia and South Korea all clocked gains.

Of the lot, Hong Kong's Hang Seng Index fared the best, adding 703.37 points or 2.6 per cent to close at 28,202.14. Australia's ASX 200 added 78.10 points or 1.2 per cent, extending an 11-year high.

But markets often cling to positive news, and at times, can be myopic.

The proposed meeting removes the worry that the two leaders would not meet but not whether a deal will be struck.

Market observers pointed out that a cooling of relations for the long haul may be too premature an assumption at present.

As one trader put it: "It was a good opportunity to take profit on yesterday's rally until the political climate is clear.

"It is best to stay vigilant, especially since markets remain volatile and trade issues can always head south."

In keeping with the risk-on mood yesterday, the Singapore market had another day of vibrant turnover on its hands.

Trading volume clocked in at 1.63 billion securities, 36 per cent over the daily average in the first five months of 2019.

Total turnover came to $1.46 billion, 40 per cent over the January-to-May daily average.

Across the market, advancers trumped decliners 293 to 140. Just a single counter - Dairy Farm International - of the STI's 30 components closed in the red.

Financials led the way, with DBS Group Holdings finishing 63 cents or 2.5 per cent higher at $25.43, OCBC Bank gaining 23 cents or 2.1 per cent at $11.18 and United Overseas Bank finishing at $26.14, advancing 54 cents or 2.1 per cent.

DBS shares were given an additional boost following an upgrade of the bank's stock to "buy" by OCBC Investment Research.

It said it was an opportune moment to enter positions on the stock, which has "Reit-like traits including quarterly dividend payout".

OCBC head of research Carmen Lee maintained the fair value for DBS at $29.18.

Separately, DBS Equity Research noted in its stock pulse report yesterday that "cyclical laggards to the current rebound could attempt a catch-up in the near term".

This includes counters like Sembcorp Industries (up five cents or 2.1 per cent to $2.44), Sembcorp Marine (up four cents or 2.7 per cent at $1.51), and Keppel Corp (up 13 cents or 2 per cent at $6.51).

While markets remained largely positive and may continue to do so after the Fed meeting, judging from recent volatility and the unpredictable nature of Mr Trump, it is probably best not to look at the future with rose-tinted glasses.

For full listings of SGX prices, go to https://www2.sgx.com