STI enjoys 4 straight days of gains

Online investment guide Investopedia defines the "January effect" as a seasonal increase in stock prices during the month of January that often occurs at the start of each year.

"Analysts generally attribute this rally to an increase in buying, which follows the drop in price that typically happens in December when investors, engaging in tax-loss harvesting to offset realised capital gains, prompt a sell-off," said Investopedia.

"Another possible explanation is that investors use year-end cash bonuses to purchase investments the following month."

Whatever the reasons for the phenomenon, the local stock market enjoyed its own version of the "January effect" this week when the Straits Times Index (STI), which ended flat for 2016, burst into life during the first week of 2017, gaining a total of 81.87 points or 2.8 per cent, including Friday's 8.49 points rise.

Not surprisingly, the five largest capitalised stocks contributed the most towards the STI's rise, namely the three banks, Singtel and Jardine Matheson.

The most actively traded stock this week was Noble Group while large pushes on United Engineers (UE) and Global Logistic Properties (GLP) on Thursday before trading was halted.

Turnover in this holiday-shortened week averaged S$1.1 billion, with Friday's total coming in at 2.2 billion units worth S$1.14 billion.

Structured warrants on the Hang Seng Index were that segment's most active counters - as they were throughout 2016.

Expect buddingsupply-ledrecovery inselective sectorsthat includebusiness park,hospitality andin the privateresidentialspace.UOB kay Hian

The push on the STI has come largely on the back of rises on Wall Street, where investors are banking on fiscal policy replacing monetary policy to boost economic growth and earnings.

As to whether changes in the US will be good for this region, opinions are guarded.

Pioneer Investments' head of Asian equities, Angelo Corbetta, was recently interviewed for his outlook on the Asian equity market in 2017. He said that recent developments in the US, and what we can expect from the new US administration, may not be very positive for global trade and this might affect emerging markets in Asia.

CURRENCIES

"Of course, if this materialises, currencies will be under pressure. Therefore, we need to watch local currencies. I think in the short term, we need a stabilisation period and I don't expect much to change in the next three to six months," said Mr Corbetta, who added that his favourite markets in Asia are Japan, Australia and Taiwan, while his least preferred markets are Thailand, Indonesia, Malaysia and South Korea.

Among the other reports of interest was UOB Kay Hian's Jan 4, 2017 Singapore property strategy in which it maintained an "overweight" on the sector as it believes concerns over a rise in interest rates have been overblown.

"Expect budding supply-led recovery in selective sectors that include business park, hospitality and in the private residential space," said the broker.

It said that it is sceptical of the view that the US Federal Reserve will raise interest rates three times this year because of the anti-globalisation sentiment in Europe, depressed growth in mature Asian markets and slowing growth in China.

This article appears in The Business Times today. For full listings of SGX prices, go to http://btd.sg/BTmkts