by Roger Tan, SIAS Research
Singapore’s equity market made some good gains last week as the country announced strong GDP growth on Wednes- day. The Ministry of Trade and Industry announced that the Singapore economy expanded by 19.3 per cent compared with the same period last year – higher than the 16.9 per cent growth in the first quarter of the year – with the manufacturing sector powering ahead with a 45.5 per cent growth rate year‐on‐year.
The news prompted an otherwise lacklustre STI to rally by almost 1 per cent; moving the index closer to the psychologi- cal 3000 points level. For the whole of last week, the STI gained 1.4 per cent to close at 2958.
Economic news from the US was, however, less rosy. Weaker consumer confidence data out last Friday sent the major US indices like the DJIA and S&P 500 down by around 3 per cent. The S&P 500 ended the week down by 1.2 per cent.
A few important US economic data, such as housing starts and leading economic indicators, will be released next week. Economist are however not optimistic. Many are expecting that these data will point to the US economy weakening, rather than improving.
However, more companies (in Singapore and the US) will also be announcing their results next and many are expected to declare relatively strong 2Q10 performance. Whether investors will avoid the market fuelled by fear of poor economic data or charge into the market motivated by optimism over strong earnings is really hard to tell.
As such, with the STI now close to the 3000 point level again, investors can consider using some put warrants to hedge potential downside. For individual stocks, we continue to suggest investors to look closely at our top three picks. These counters are undervalued and should not be missed.
