Monthly Market Wrap: Up 1.3% for the month, up 16.9% for the year

Date: January 2, 2025

• The STI’s rises in Dec were capped by negativity from Wall St but gain for the year was still an impressive 16.9%
• Banks provided the main push with gains between 28-31%
• The reason for the drag was lowered US rate cut expectations following Dec’s hawkish FOMC
• Despite the FOMC disappointment, all major US indices were up 13-29% for the year
• Probability of no rate cut in January is 90.4%
• SingPost was prominently in the news
• S-Reits’ secondary fundraising rebounds in 2024; more may tap capital markets next year: SGX Research

 

Lowered US rate cut expectations limit the STI’s upward push

The Straits Times Index closed out a relatively quiet December at 3,787.60, recording a modest net gain of about 48 points or 1.3% for the month. For the year however, it recorded a rise of 547 points or about 16.9%, its best annual performance since 2017.

The gain for the year was led mainly by the three banks – DBS, UOB and OCBC gained 31, 28 and 28% at S$43.72, S$36.33 and S$16.69 respectively.

Among the other index components, SGX’s shares rose S$2.91 or 29.6% to S$12.74 over the year, whilst Singtel’s gain was S$0.61 or 24.6% at S$3.08.

During the month, the STI closed at a 17-year high of 3,822.68 on 5 Dec, leading to hopes that might soon after challenge the all-time high 3,906 that was hit in Oct 2007.

This did not materialise, largely due to disappointment emanating from Wall St, where interest rate cut expectations had to be tempered after the last Federal Open Markets Committee meeting of the year in mid Dec. At one point in the month, the Dow Jones Industrial Average fell for ten consecutive sessions, its longest losing streak since 1974.

How Wall St fared – major indices up 13-29% in 2024

Over in the US, the Dow Jones Industrial Average rose nearly 13% in 2024, locking in its best year since 2021, according to Dow Jones Market Data. The S&P 500, up 23% this year and 53% over the past two years, locked in its best two-year stretch since 1997 and 1998.

Meanwhile the Nasdaq Composite rose nearly 29% this year and 84.8% over the past two years.

US analysts think the rise will continue in 2025

US newspaper Barron’s quoted Adam Turnquist, chief technical strategist at LPL Financial as saying “Strong corporate profits, easing monetary policy, and artificial intelligence investment and enthusiasm lifted the broader market in 2024’’.

Wall Street strategists have reacted to a resilient economy, progress on inflation, and climbing corporate earnings by upping their 2025 forecasts for the S&P 500, according to Turnquist. Since 2019, the only time Wall Street overestimated the S&P’s gains was in 2022, when it fell sharply.

“Turning back to the year ahead, the 2025 aggregate forecast marks about a 10% premium to the S&P 500 — the most bullish forecast since 2022, ironically,” Turnquist writes.

“Numeric estimates aside, the broad consensus is another positive year for stocks and gains at the sector level remaining widespread, with the bull market likely reaching its third anniversary in 2025.”

The US Fed delivered its expected rate cut but also adopted hawkish stance

In December the US Federal Reserve cut interest rates for the third time this year, this time by 25 basis points to its target range of 4.25-4.5%.

The cut had been widely expected but what was not was the relatively hawkish statements that accompanied the reduction with the Fed stating that inflation is still a problem, signalling possibly fewer rate cuts in 2025 than had been previously expected.

As such, the probability of no rate cut at the 29 Jan Fed meeting now stands at 90.4%.

SingPost was prominently in the news

Early in the month, SingPost announced it is to sell Aussie business for A$1b as part of its strategic reset.

The review, launched earlier this year, sought to explore strategic options that would enhance business value and maximise shareholder value, it said.

SingPost will receive actual cash proceeds of A$775.9 million and generate a gain on disposal of about S$312.1 million, subject to adjustments determined at the time the deal is completed. The buyer is Pacific Equity Partners (PEP) an Australia-headquartered private equity fund, said the national postal service firm.

However, ratings agency S&P responded by placing SingPost on CreditWatch negative, saying the sale will be “transformative” for SingPost and clouds SingPost’s future strategy.

Analysts in the meantime responded by saying the S&P rating was largely irrelevant and the stock was still a “buy’’.

Later in the month however, SingPost announced that three top executives had been fired with immediate effect, leading to a plunge in its share price. The three have disputed the reasons the company gave for their dismissal.

Meanwhile, PEP has stated the deal is till on track but many questions remain and the saga looks set to extend into 2025.

S-Reits’ secondary fundraising rebounds in 2024; more may tap capital markets next year: SGX Research

As of Dec 13, at least six S-REITs have announced equity fund raising (EFR) exercises this year, raising over S$2.8 billion, including S$1.6 billion from private placements and S$1.1 billion from preferential offerings, said SGX Research in a 16 Dec Update.

This has exceeded the nearly S$1.9 billion in secondary fundraising by S-REITs in 2023, where activity was relatively muted amid the high-interest rate environment.

“DBS Group Research analysts said in a note this month that the S-REITs sector has seen a revival of acquisition deals. They predict that more S-REITs would tap the capital markets to fund acquisitions going into 2025, especially counters in the industrial and data-centre space, which are trading close to book value’’ noted SGX Research.

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