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Slim gains as risk appetite takes a hit

This article is more than 12 months old

But observers say weakness lingering in markets may prove an opportunity for punters looking for bargains

The much-delayed "Santa rally" remains elusive as most Asian markets opened the second last week of the year with slim gains, after risk appetite took a hit from lacklustre economic data out of China last Friday.

Stocks in Shanghai, Tokyo and Seoul gained marginally at less than 1 per cent. The exception was Hong Kong, which ended the day flat.

That said, the weakness lingering in markets may prove an opportunity for punters looking for bargains, according to some observers.

"Buy-back was seen among shares in major companies following a sharp decline (last) Friday," Daiwa Securities senior technical analyst Hikaru Sato told AFP in Japan, although he noted that more time may be needed to improve market sentiment, as the buy-back was not strong enough to boost shares further.

In a TV interview with CNBC, Mr Khiem Do, head of Greater China investments at Barings, said: "Over the next few months, if there were to be any more weakness in the Chinese market, we think that there will be more investors coming in to buy."

He added: "The Chinese markets are actually quite cheap."

Singapore's benchmark Straits Times Index also had a better showing, ending the day 1.2 per cent higher at 3,114.25.

About 985.3 million shares worth $810.6 million changed hands. Gains were led by all three local banks.

United Overseas Bank jumped 2.64 per cent to $24.92. In recent outlook reports for the year ahead, most analysts have highlighted the banking sector among their top picks for next year, with net interest margin expected to grow next year.

The gains also suggested that investors looked past data that showed a worse-than-expected fall in Singapore's non-oil domestic exports (Nodx) last month, with shipments to most of its major trading partners declining.

Singapore's Nodx fell 2.6 per cent last month from a high base a year ago, and after an 8.2 per cent spurt in October, according to the latest trade figures released by trade promotion agency Enterprise Singapore.

Except for the US, Thailand, Japan and Taiwan, domestic exports to the top 10 markets fell last month, with decreased domestic shipments to China, South Korea and Indonesia, making them the biggest contributors to the fall.

Local investors may only see more gloom, as industry watchers believe the weak Nodx could weigh on output growth.

ING's chief economist Robert Carnell said: "Although the month-on-month correlation with NODX is not terribly good, it's not zero, and this raises the chances of soft November production which, in turn, would make it hard for Q4 2018 gross domestic product to finish on a strong note."

He noted the growth in domestic exports of electronic products but believes that for the time being, more traditional industrial output remains the main driver for the economy, and for activity indicators like industrial production.

The recent market tensions globally may be a sign of more sell-offs to come, if the Bank of International Settlements (BIS), an umbrella group for the world's central banks, is right.

"The market tensions we saw during this quarter were not an isolated event," Mr Claudio Borio, head of the monetary and economic department at the BIS, warned on Sunday.

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