A week of STI resilience despite US trade flip-flops, political turmoil and Middle East worries

Trying to gauge where stock markets might head is a notoriously difficult business without having to factor in a US President who flip-flops as often as Donald Trump. Markets spent last week – as they did the week before - pondering the answer to the question of whether the US and China will indulge in a trade war or not, with prices gyrating in tandem with developments on the political and trade front. There were no clear answers, mainly because Mr Trump kept sending mixed messages.

For the US, much of the relevant news came previously from tweets by President Trump, though last week the market relied more on a mixture of tweets and dispatches through official channels of communication. Tuesday’s conciliatory comments by Mr Trump about a speech made by China’s leader Xi Jinpeng helped reduce trade war worries, as did sudden, unexpected comments on Thursday by the US president that America might re-join the TransPacific Partnership or TPP which he had exited in the first weeks of his presidency.

Apart from trade concerns however, Wall Street on Monday was also rocked by news that the FBI had raided the office of Mr Trump’s lawyer Michael Cohen to obtain information on the President’s alleged affair with porn star Stormy Daniels.

Still, despite the wobbles from the US, the Straits Times Index proved resilient throughout the week, rising four of the five days to finish at 3,501.3, a gain of 59 points or 1.7% for the five days. Most of this came on Friday when the index rose 32.69 points, though Wall Street’s slide later than day could mean a weak opening for the STI on Monday.

Average daily volume was S$1.18 billion, not great as far as most brokers are concerned.

Financially troubled commodities trading firm Noble Group was in the news once again when its founder Richard Elman was reported by Bloomberg news agency as pushing for a new restructuring deal, different from the ones currently on the table.

Datapulse Technology, which is holding an April 20 shareholders meeting to decide on whether to retain its current board, said on Wednesday that it has appointed law firm Lee & Lee to conduct an independent review of its internal controls as ordered by the Singapore Exchange. OnThursday it said in a press statement that it intends to diversify into the hair care business via its purchase of Malaysian firm Wayco Manufacturing.

Datapulse shareholders will vote on 10 resolutions on April 20 – eight relating to proposed board changes, one on business diversification and one on the payment of a one cent special dividend following the sale of a building completed on 31 January 2018.

Among other local developments, property analysts were quoted in the press as saying that if prices continue to rise on the back of an increasing number of en bloc sales, there is a risk that the government might step in with a fresh round of cooling measures. Notwithstanding this, brokers remain upbeat on property developer stocks. For example, Maybank Kim Eng on Wednesday said it is maintaining its "positive" view of the sector.

"Fresh data points continue to validate our call for a property price rebound. Significant premiums achieved at new launches suggest initial estimates can be sustained, calling for a strong 3.1% QoQ rise on the 1Q18 URA PPI. Consultants recently raised their forecasts and now see home prices rising by 7-15% this year. Developers can capitalize on the strengthening market by acquiring 15 residential sites currently up for tender" said the broker.

During the week, it was announced that Yanlord Group and MCL Land had clinched the en bloc sale of Tulip Garden for S$906.9 million, the second largest this year.

Schroders in its April Talking Point offered three coping strategies for investors in a mature bull market, the first being to note that valuations are stretched and at this point of the cycle, it believes that investors should be ready to leave some return on the table and not chase growth stocks.

The second bit of advice is to be diversified. "To help stay prudently invested, we suggest spreading your risk across a range of return sources. For example, we have been diversifying into alternative exposures such as relative value and currency strategies. Within equities, we have some exposure to value stocks as they have lagged the rest of the market and exhibit lower sensitivity to interest rates" said Schroders, adding that the third is to plan one’s exit strategy.

Other than developments on the US-China trade front, markets in the coming days will be concerned as to whether the US will launch a missile strike on Syria. This was reported to have played a big part in the US market’s fall on Friday.