SINGAPORE – The first quarter was one of the best in recent memory for the Singapore stock market.
Among the 18 largest global stock indices tracked by Bloomberg, the Straits Times Index (STI) was the second best performer, just behind the weighted Taiwan Stock Exchange index, which generated an 11.8% gain (in Singapore dollars).
The STI ended the January-March quarter with an 11.3% gain. But including dividends, the total return rose to 11.8%.
This is the strongest first quarter in STI since 2012.
As noted by Mr. Geoff Howie, a market strategist at the Singapore Stock Exchange, the main driver of STI performance has been the three banks, which together account for 40 percent of STI.
“The trio of DBS, OCBC and UOB continued to operate in tandem with its global peers, averaging 15.4% gains while receiving $ 1.02 billion in net institutional inflows in 1Q21,” a- he stressed.
The uptrend in STI followed the rally on Wall Street, with the Nasdaq, the Dow Jones Industrial Average and the S&P 500 index hitting new highs last week as administration Joe Biden proposed a funding bill. massive infrastructure of US $ 2 trillion (S $ 2.7 trillion).
Meanwhile, economic figures in the United States confirm that reflation and recovery are underway.
Figures released last Friday showed a better than expected 916,000 new jobs created in March – the most in seven months.
The growth of the manufacturing industry in the United States also advanced last month as the Institute of Supply Management announced last Thursday that its index of national industrial activity fell from 60.8 in February to 64.7 in March, the highest level since December 1983.
Global stocks have advanced nearly 80% since their low in March last year.
Mr. Hou Wey Fook, chief investment officer at DBS Bank, sees more benefits for stocks.
“The vaccine rollout will break the start-stop cycle of economic lockdowns and reopenings. Coupled with billions of dollars in fiscal stimulus around the world, we are now on track for corporate growth and profits to normalize.” , he noted in a last report. week.
But analysts are keeping an eye out for the potential return of inflation.
Nonetheless, the general view is that the markets are well supported by abundant liquidity, a noticeable recovery in the economy and businesses, and rising incomes.
“While it is undeniable that valuations are above historical averages, the abundance of zero-cost liquidity around the world will minimize an impending stock market crash,” Hou wrote.
Mr. Vasu Menon, executive director of investment strategy at OCBC Bank, agrees.
If US Federal Reserve policymakers remain dovish, long-term bond yields show signs of stability, and US and Chinese economic data released this week show further improvement, this should bode well for investors. global stock markets and could fuel further upside, he said.
“The cyclical stock or stock that will benefit from the growing attention given to the topic of reflation could benefit in the coming weeks and maybe even months as the economic recovery gains traction,” he said. -he adds.
However, that does not mean any intermittent pullback in the stock markets, he warned. “The occasional corrections are normal and healthy, even in a bull market. They allow markets that have been on a tear to catch their breath before resuming their uptrend.”
Looking ahead, markets will closely follow the minutes of the Fed’s March 16-17 policy meeting, which will be released on Wednesday.
This could further shed light on what policymakers have said about inflation and whether there is a debate on the Fed’s quantitative easing program.
Fed Chairman Jerome Powell is also taking part in an International Monetary Fund roundtable on Thursday. Markets will be on the lookout to see if he says anything new about the US economy and monetary policy.