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

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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