Date: April 12, 2021
- The STI added just 3 points over the week at 3,184.54;
- Positive Wall St sessions provided the main support;
- US sentiment remained firm thanks to assurances from the Fed;
- US trading volume could be tapering off;
- Top Glove said it is successfully addressing its labour issues with US authorities;
- Building and construction stocks were in play;
- Top US analyst warned of rising valuations and sentiment
Cautious but firm trading last week
The market took a bit of breather last week, with the Straits Times Index only managing to add 3 points over the five days at 3,184.54 after it had briefly crossed the 3,200 mark earlier in the week.
Prices however, remained well supported by a firm Wall Street which, despite the occasional wobble, didn’t look like undergoing a correction of any significant magnitude.
Wall St provided main support, thanks to Fed’s assurances
A big part of the reason why the US market has remained steady has been assurances from officialdom, most notably Federal Reserve chief Jerome Powell.
Apart from comments over the past few weeks that interest rates will remain low, inflation is benign and that bond purchases will remain in place, last week he said at a virtual meeting of the International Monetary Fund and the World Bank that there are a number of factors that are coming together to support “a brighter outlook for the US economy’’, adding that those factors are putting the nation “on track to allow a full reopening of the economy fairly soon’’.
His comments have helped push Wall St to new all-time highs. On Friday, the Dow Jones Industrial Average gained 297.03 points, or 0.9%, to 33,800.60, while the S&P 500 advanced 31.63 points, or 0.8%, to 4128.80. Both closed at new records.
Volume appears to be falling
However, Bloomberg reported that even as prices rose, trading volume plunged, with the five-day average across U.S. exchanges dropping to 9.5 billion shares traded — the lowest since October, according to Bloomberg data. Friday was particularly placid, with just 8.7 billion shares moving, the lowest daily total since Christmas Eve.
In Singapore, volume has also settled back to around S$1b per day, an unspectacular figure as far as the broking industry is concerned. Friday’s figures of 1.7b units worth S$1.04b yielded an average unit traded of S$0.61 whilst the top volume list showed that the nine most active stocks were priced S$0.20 or below.
Top Glove said it is addressing its labour issues
Rubber glove maker Top Glove, which has come under scrutiny lately by US Customs and Border Protection (CBP) over criticism of its labour conditions said last week that it has addressed most of the concerns and is close to the industry’s best practices.
In a Thursday briefing the company said it has made significant improvements since Aug last year on the 11 forced labour indicators from the International Labour Organisation that were identified by the CBP. Six of these indicators were fully resolved by March this year.
Top Glove’s managing director Lee Kim Meow was quoted in the Business Times as saying his firm is currently at the second stage of the four-step Withhold Release Order that CBP issued in July 2020.
Top Glove’s shares are dual-listed in Singapore and Malaysia. When the above announcements were made on Thursday, the shares added 10% in KL and 10.8% here to S$1.75. They ended the week at S$1.70.
Building and construction stocks were in play
Shares of building materials provider EnGro Corp and ready-mixed concrete supplier Pan United Corp last week rose to 52-week highs as the market played up building and construction stocks in anticipation of the economy recovering.
Other stocks in the sector have also been in focus – steel fabricators BRC Asia and TTJ Holdings’ shares are up 47% and 35% over the past 12 months.
Tobias Levkovich, chief equity strategist at Citigroup, was quoted by Bloomberg on Friday saying sentiment is in “very worrisome territory as is valuation’’.
“Huge fiscal stimulus and supportive central banks have created the notion of there being no need to be risk averse,” he added. “Indeed, all developments are perceived as positive news. Yet, such one-sided views are not usually a good starting point”.
He expects the Fed to start rolling back monetary stimulus later this year and earnings guidance to weaken, posing headwinds for stocks and stoking volatility.