In the 2nd Quarter of 2024, the most surprising market that played the catch up is definitely Hong Kong market, which ran up as much as 3500 over points within few weeks. Whereas on the other side, Singapore market seem relatively less appealing to funds. Adding to the pain, MSCI had recently announced changes in constituents for the MSCI Global Standard Indexes (which will take place as of the close of May 31, 2024), and 5 Singapore listed companies which are all STI component stocks, will be deleted from it. That's include blue-chip heavyweights such as City Developments Limited C09 (CDL), Jardine C&C C07 , Mapletree Logistics Trust M44U , Mapletree Pan Asia Commercial Trust N2IU and Seatrium 5E2.
So the MSCI index review really matter to investor? I think that's really depend, but it tells one things about what the funds are focusing now and especially this recent review includes the net deletions on China, but net additions on India. In conclusion, the direction of fund flow will likely to continue head towards India... and probably other US allied.
Investor should take note of the MSCI's next announce on new inclusion for Index Review: Aug 11 or 12
o Announcement date: August 12, 2024
o Effective date: September 02, 2024
Singapore Singapore had released the GDP, CPI and Industrial production last week [GDP] [CPI and Industrial Production], and in summary, the economy is improving but at a very slow pace. With the first quarter reporting season came to an end, STI had also turned directionless since then. Traders speculated between various sectors and resulted in STI seem lack of momentum to break up from the resistance of 3325 points . Currently, STI still ride on the rising trend line, and this's the 5th time that STI touches the resistance and attempts to break up, and I think this's time may happen for good, to break up higher in the month of June. 😁
US Interest Rate:
When markets always tried to time the Fed on exactly when the first rate cut will be announced, sectors like real estate, REITs, retail, finance... are seemed to be the main beneficiaries. But the truth is ultimately more people will be willing to invest into the stock markets because the operating costs from companies will fall at the lower interest environment, and in return the dividends for shareholders will likely to increase.
But for the past few weeks, before the Dow Jones Index broke through 40,000 points and then pulled back 600 points on 24 May, the market forces had been giving all "excuses" to push the all 3 major US indexes higher. Review the past, markets bought on strong corporate earnings, it also continue to buy up on weak economic data in the hope of coming rate cut can be more quickly materialized. In conclusion, US market will remain strong for any possible reason but the utlimate driver is still likely the year-end US presidential election.
Given the current geopolitical risk is on the rise, the government political orientation somehow decides the direction of the fund flow. As such, investors should not make investment decisions based solely on fundamental analysis to build investment portfolio. Technical analysis is in fact getting more important today as the cycle of policy changes is getting shorter, in turn causing the entire equities market become much more volatile than ever.
Investment strategies : Diverification
As such, more and more investors started to look for investment opportunities outside Singapore market. For example, KLSE seem get some attention since Malaysia's GDP had grown by 4.2% in the first quarter of this year, up 1.4% from the previous month and outperforming the market expectations. Not to mention Japan and India, Hong Kong stock market had also played catch up, and rised more than 3,000 over points in April as mentioned earlier. Therefore, I'll strongly suggest investors to consider doing some researches on foreign markets to diversify your investments.
But one thing to note is the exchange rate with the Singapore dollar, after all SGD remains as strong as ever, and making this a reason on why the local market look boring, but stable.
Coming Week :
There will be no important local data next week, but investors can then pay attention to the US GDP on Thursday and the PCE price index on Friday, which is an important indicator for measuring whether inflation is rising.
After all, since the Federal Reserve's inflation target set at 2%, had already sent out a message about the commodities prices will likely be volatiled because both long hedge and short hedge will co-exist among the alliances of nations in this fragmented and geopolitical world.
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