SGX Market Updates

US Rate Speculation Fuelled this Week’s Swing in Singapore Stocks


PUBLISHED ON |

12 July 2019

  • Strong employment data on night of July 5 saw global equity markets start the week on a weaker tone, with speculation that the best monthly gain in US jobs since Jan 2019 made a weaker case for an accommodative interest rate cut by the FOMC on July 30/31.

  • Speculation was quelled 30 minutes into session one of the Fed Chair’s two-day semi-annual Monetary Policy testimony on night of July 10. Chairman Powell gave a straight no answer when asked if the July 5 employment report changed outlooks for interest rates.

  • In SG, close to half of the 100 highest turnover stocks saw increased volatility over the relevant four sessions. Half of these stocks declined on July 8 (following the jobs report), and four-fifths of the 100 stocks closed at or above July 8 levels, in the session that followed the testimony.




Could One Strong Job Report Change the Outlook for a Potential US Rate Cut?

On the night of Friday July 5, the US Labor Department reported that 224,000 jobs were created in the United States for the month of June 2019. This was led by the professional and business services sector and the highest jobs growth since January 2019.

However, recent months had seen mounting expectations of an interest rate cut by the Federal Open Market Committee (“FOMC”) at the July 30-31 meeting.  This would be the first US Federal Funds Rate cut since December 17, 2008. The current rate target range for the Federal Funds Rate is 2.25% to 2.50%. The last time the Federal Reserve moved interest rates back towards 2.00% was in April 2008, citing that economic growth had remained weak, labour market conditions had deteriorated further, and manufacturing activity was soft. Hence the strong jobs report appeared to make a weaker case for rate cuts in 2H19, after a neutral, patient and data dependent Federal Reserve in 1H19. 

As a result, most markets were weaker across the board on Monday July 8 with a stronger bid-tone in the US Dollar. In Singapore, half of the 100 most active stocks by turnover this week were lower, with a number of Real Estate Investment Trusts and USD-denominated stocks, a defensive exception.  Comparative close prices are tabled below.



“The Straight Answer is No”

On the night of Wednesday July 10, the Federal Reserve Chair Jerome Powell delivered the first session of the Semi-annual Monetary Policy Report to the Congress, which concluded with a second session last night.

Thirty minutes into the first session, Congresswoman Carolyn Malone questioned the Fed Chair on whether or not the strong June 2019 jobs report had changed his economic outlook. Chairman Powell stated that ‘the straight answer is no’, and while the job report was great news, broader US, Europe and Asia data has continued to disappoint, particularly in the manufacturing and trade-related sectors. Chairman Powell also noted that while the recommencement of discussions with China is constructive, uncertainty still weighs the trade outlook and the FOMC will continue to examine the full range of data that impacts its dual mandate.

Coincidently, the US Dollar gave back its post-jobs report gains, and markets were broadly stronger on the expectations that the Federal Reserve could cut interest rates at the next FOMC meeting on July 30-31, with added potential for further cuts. This would be in order to  ‘take some insurance against a sharper US slowdown’ as reiterated by FOMC Member and known dove, James Bullard. 

With the Fed Chair maintaining an outlook attuned to the key global growth drivers of manufacturing and other trade-related businesses that also impacts Singapore markets, the ensuing trading session of Thursday July 11 saw the majority of the 100 most active stocks by turnover this week close above their Monday July 8 levels.



Rate Speculation Provided a Shorter-Term Trading Opportunity

The 100 most active stocks by turnover over the first four sessions of this week have averaged 1.8% gains in the month-to-date which have brought their average total return through to the July 11 close to 16.8%.

The four sessions which spanned the reaction of the jobs report to the Fed Chair stating it would not change the case for a pending rate cut, saw increased volatility in close to half of the 100 stocks.

For instance, Singtel saw a considerable pick up in short-term volatility, declining 1.4% to S$3.48 following the stronger jobs report on Monday, before ending Thursday (following session one of the Fed testimony) at S$3.56, and up 2.3% from the Monday close. The stocks that were observed to see a pick-up in volatility are highlighted in the table below.

Stock Turnover
 Rank
5-11 July
Turnover
 Rank
1H19
Fri
5 July
Close
(SGD)
Mon
8 July
Close
(SGD)
Thurs
11 July
Close
(SGD)
MTD Total
Return
%
YTD Total
Return
%
DBS GROUP HOLDINGS 1 1 25.61 25.37 25.63 -1.3 11.7
SINGAPORE TELECOMMUNICATIONS 2 4 3.53 3.48 3.56 0.9 20.5
UNITED OVERSEAS BANK 3 2 26.44 26.07 26.26 1.2 10.5
OVERSEA-CHINESE BANKING CORP 4 3 11.48 11.31 11.39 0.7 3.9
ASCENDAS REAL ESTATE INV TRT 5 5 3.09 3.11 3.18 -1.0 23.5
CAPITALAND COMMERCIAL TRUST 6 9 2.18 2.26 2.30 0.5 27.5
CAPITALAND 7 8 3.69 3.68 3.72 4.5 22.7
COMFORTDELGRO CORP 8 16 2.80 2.77 2.77 5.3 33.3
CAPITALAND MALL TRUST 9 10 2.69 2.71 2.74 2.3 21.2
KEPPEL CORP 10 15 6.62 6.52 6.66 -0.6 14.5
VENTURE CORP 11 11 15.31 15.90 16.11 -6.0 13.2
SUNTEC REIT 12 22 1.95 1.98 1.99 0.5 13.0
MAPLETREE LOGISTICS TRUST 13 14 1.59 1.63 1.65 0.0 29.8
WILMAR INTERNATIONAL 14 17 3.72 3.79 3.81 0.5 21.6
YANGZIJIANG SHIPBUILDING 15 7 1.49 1.50 1.51 -2.6 23.3
SINGAPORE EXCHANGE 16 12 7.97 7.95 7.94 0.6 13.7
THAI BEVERAGE PCL 17 21 0.880 0.865 0.865 6.0 47.5
HONGKONG LAND HOLDINGS 18 20 9.05 9.07 9.16 3.8 7.7
SATS 19 34 5.29 5.37 5.39 1.3 13.5
CITY DEVELOPMENTS 20 18 9.50 9.48 9.67 0.3 18.8
MAPLETREE INDUSTRIAL TRUST 21 31 2.32 2.30 2.33 3.6 25.2
GENTING SINGAPORE 22 6 0.920 0.915 0.915 0.0 -3.7
JARDINE MATHESON HLDGS 23 13 86.44 86.90 88.28 1.3 -7.1
SINGAPORE TECH ENGINEERING 24 19 4.27 4.21 4.23 3.1 25.6
MAPLETREE NORTH ASIA COMMERC 25 29 1.46 1.46 1.46 0.0 32.0
FRASERS LOGISTICS & INDUSTRI 26 35 1.24 1.29 1.27 2.5 24.1
MAPLETREE COMMERCIAL TRUST 27 23 2.05 2.09 2.09 -1.9 27.4
NETLINK NBN TRUST 28 38 0.885 0.890 0.885 -0.6 19.1
JARDINE CYCLE & CARRIAGE 29 24 37.34 35.93 36.30 3.1 8.6
EC WORLD REIT 30 126 0.755 0.760 0.785 -3.2 13.8
SINGAPORE PRESS HOLDINGS 31 37 2.49 2.55 2.54 2.0 8.3
JARDINE STRATEGIC HLDGS 32 25 52.17 53.03 53.47 1.1 4.9
UOL GROUP 33 28 7.58 7.59 7.73 0.4 25.3
SINGAPORE AIRLINES 34 26 9.45 9.48 9.49 1.9 0.3
SIA ENGINEERING CO 35 89 2.78 2.78 2.89 10.8 22.5
SEMBCORP MARINE 36 30 1.42 1.41 1.42 -6.0 -7.8
FRASERS COMMERCIAL TRUST 37 47 1.65 1.67 1.70 -1.2 24.4
AEM HOLDINGS 38 27 1.04 1.02 1.03 1.0 28.5
SEMBCORP INDUSTRIES 39 36 2.40 2.41 2.42 -0.4 -4.8
KEPPEL REIT 40 33 1.27 1.28 1.27 0.8 14.0
CORDLIFE GROUP 41 300 0.590 0.515 0.515 19.2 56.8
KEPPEL DC REIT 42 40 1.68 1.72 1.73 0.6 27.6
DAIRY FARM INTL HLDGS 43 41 9.88 9.79 9.89 2.1 -18.4
CDL HOSPITALITY TRUSTS 44 49 1.66 1.64 1.66 1.8 17.2
ASIAN PAY TELEVISION TRUST 45 69 0.186 0.172 0.172 8.8 52.5
FRASERS CENTREPOINT TRUST 46 44 2.64 2.67 2.73 1.5 26.0
HI-P INTERNATIONAL 47 32 1.38 1.39 1.39 -0.7 60.6
ASCOTT RESIDENCE TRUST 48 46 1.30 1.29 1.31 0.0 24.5
ASCENDAS HOSPITALITY TRUST 49 93 1.03 1.04 1.05 5.1 38.6
KEPPEL INFRASTRUCTURE TRUST 50 43 0.505 0.505 0.500 0.0 9.5
GLOBAL INVACOM GROUP 51 113 0.118 0.113 0.110 29.7 237.1
ESR-REIT 52 48 0.545 0.540 0.535 3.8 12.6
HAW PAR CORP 53 92 14.31 14.06 14.18 1.3 27.8
SINGAPORE POST 54 52 0.985 0.980 0.985 3.7 8.2
GOLDEN AGRI-RESOURCES 55 45 0.305 0.300 0.295 5.2 27.0
STARHILL GLOBAL REIT 56 58 0.790 0.795 0.785 1.9 19.8
CAPITALAND RETAIL CHINA TRUS 57 51 1.60 1.59 1.60 2.6 21.6
FIRST REAL ESTATE INVT TRUST 58 59 1.06 1.05 1.06 2.9 12.3
FORTUNE REIT 59 166 1.89 1.91 1.93 1.6 25.3
CROMWELL EUROPEAN REIT 60 54 0.718 0.724 0.725 -2.8 12.4
SPH REIT 61 84 1.12 1.10 1.09 4.7 15.0
YANLORD LAND GROUP 62 50 1.29 1.31 1.31 0.0 11.4
KOUFU GROUP 63 91 0.740 0.735 0.750 7.2 22.2
SYNAGIE CORP 64 107 0.161 0.158 0.155 -8.0 0.6
CACHE LOGISTICS TRUST 65 60 0.785 0.790 0.790 -0.6 17.7
MANULIFE US REAL ESTATE INV 66 62 1.19 1.20 1.21 1.4 20.1
SASSEUR REAL ESTATE INVESTME 67 88 0.800 0.800 0.800 1.3 31.7
EAGLE HOSPITALITY TRUST 68 76 0.956 0.952 0.952 -1.2 0.0
PARKWAYLIFE REAL ESTATE 69 61 3.06 3.04 3.05 1.0 19.1
SINO GRANDNESS FOOD INDUSTRY 70 122 0.047 0.047 0.053 -20.3 -61.8
FAR EAST HOSPITALITY TRUST 71 67 0.685 0.680 0.680 3.0 16.6
HUTCHISON PORT HOLDINGS TR-U 72 55 0.305 0.306 0.306 -1.9 -4.5
ARA US HOSPITALITY TRUST 73 118 1.21 1.20 1.21 -0.3 0.0
STARHUB 74 42 1.55 1.55 1.55 0.6 -7.7
FIRST RESOURCES 75 64 1.55 1.56 1.60 -2.5 1.8
CHASEN HOLDINGS 76 132 0.089 0.087 0.085 6.0 20.2
TEE INTERNATIONAL 77 96 0.092 0.087 0.087 5.7 -36.7
FRASERS HOSPITALITY TRUST 78 103 0.720 0.720 0.730 2.1 6.1
YOMA STRATEGIC HLDGS 79 87 0.375 0.380 0.385 -2.6 10.3
Y VENTURES GROUP 80 116 0.109 0.106 0.107 -22.1 -52.6
ASCENDAS INDIA TRUST 81 73 1.40 1.38 1.37 2.9 33.4
REX INTERNATIONAL HOLDING 82 53 0.071 0.069 0.070 -1.4 29.1
SOILBUILD BUSINESS SPACE REI 83 112 0.615 0.620 0.620 0.0 10.7
AIMS APAC REIT 84 101 1.47 1.47 1.49 1.4 14.8
RAFFLES MEDICAL GROUP 85 78 1.04 1.05 1.04 0.0 -3.6
KEPPEL-KBS US REIT 86 95 1.07 1.06 1.05 3.5 33.6
CHINA EVERBRIGHT WATER 87 80 0.365 0.355 0.370 9.0 23.4
OUE HOSPITALITY TRUST 88 82 0.735 0.735 0.735 2.8 13.6
BRC ASIA 89 108 1.31 1.32 1.31 -0.8 4.7
CHINA AVIATION OIL SINGAPORE 90 75 1.31 1.30 1.31 -0.8 27.9
BUKIT SEMBAWANG ESTATES 91 131 5.84 5.78 5.82 1.2 3.4
TIANJIN ZHONG XIN PHARM CO-S 92 111 1.15 1.17 1.22 -4.7 2.5
SHENG SIONG GROUP 93 63 1.11 1.09 1.10 0.9 6.5
SILVERLAKE AXIS 94 65 0.535 0.530 0.535 0.0 30.9
OXLEY HOLDINGS 95 85 0.330 0.330 0.335 0.0 15.0
ALLIANCE MINERAL ASSETS 96 102 0.134 0.137 0.142 -8.2 -46.4
FU YU CORP 97 117 0.220 0.215 0.215 7.3 21.4
HUPSTEEL 98 241 1.19 1.18 1.17 50.6 51.6
CITIC ENVIROTECH 99 81 0.345 0.350 0.355 13.1 -7.4
IREIT GLOBAL 100 141 0.785 0.780 0.775 2.6 12.4
AVERAGE         1.8 16.8

Source: SGX StockFacts, Bloomberg (Data as of 11 July 2019)







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