Equities weekly: India surges on new modi-operandi

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Global equity markets, as represented by the MSCI AC World index (0.4 per cent) posted gains for the week ended May 16, 2014, with emerging markets and Asia ex Japan equities leading the charge. MSCI Emerging Markets and MSCI Asia ex Japan posted gains of 2.5 and three per cent, led by strong performances from the likes of India (7.3 per cent), Indonesia (3.8 per cent), Hong Kong (3.9 per cent) and China (3.5 per cent). Developed markets failed to match the strong gains seen in the other regional benchmarks, with all three ending the week relatively flat with the US unchanged, while Europe and Japan posted losses of 0.1 and 0.4 per cent respectively.

The Indian equity market was the week’s best performer, with the Sensex index surging by 7.3 per cent on the back of Modi’s election victory which was built on the back of promises of reform that should help the country face some of its economic challenges. The index’s strong returns was boosted the strength of the Indian rupee, which gained 1.5 per cent against the ringgit over the course of the week.

 

Southeast Asia: Singapore’s NODX jumps, retail sales slump

Singapore’s retail sales continued to fall in the month of March, with the retail sales excluding autos registering a 0.4 per cent reading as it missed estimates of a 0.2 per cent growth rate despite improving from a downward revised 9.5 per cent contraction in February. On a month-on-month basis, retail sales decelerated by one per cent in March following February’s 0.7 per cent growth rate. Amongst the various items, weakness was seen in the sale of discretionary items such as wearing apparel &footwear, furniture & household equipment, recreational goods, watches & jewellery.

In better economic data for the city-state, non-oil domestic exports (NODX) beat estimates of a 3.3 per cent contraction to register a growth rate of 0.9 per cent on a year-on-year basis for the month of April, improving from March’s 6.6 per cent contraction.

On a month-on-month basis, NODX surged by nine per cent, easily trumping consensus expectations of a 5.1 per cent growth rate as it accelerated strongly from a 8.9 per cent decline in March 2014. While NODX was strong, detracting from some of the headline strength was the continued weakness in the electronics export sector, where exports fell by -8.7 per cent on a year-on-year (y-o-y) basis, missing estimates of a 7.5 per cent contraction despite improving from a previous 16.1 per cent decline in the previous month. IE Singapore’s one to three per cent growth forecast for non-oil domestic exports as well as for total trade remains an achievable target given the low base of electronic exports in 2013 alongside stronger global economic growth.

 

Japan: 1Q14 GDP growth highest in over 2.5 years

The Japanese economy grew at an annualised rate of 5.9 per cent in in the first quarter of 2014 (1Q14), the fastest growth pace since 3Q11, mainly due to a boost in consumption, with consumers likely bringing forward their purchases before the goods and services tax hike came into effect. Reflecting the rush to purchase, private consumption rose 2.1 per cent on a quarter-on-quarter basis in 1Q14, the highest since 1Q 1997.

Other key GDP components where positives were seen include the capital expenditure component which increased 4.9 per cent, the highest reading since 4Q11. With better than expected economic growth, the thus far underperforming (on a year-to-date basis in 2014) Japanese equity market may find some encouragement from the said data.

 

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