Equities Weekly: Risk-on sentiment carries on into the new year

Global equities started the New Year with a bang, with all major regional markets contributing to the strong showing of a one per cent gain in the MSCI AC World Index.

In the developed markets, Japan led the gains with a strong 1.9 per cent return over the course of the week, followed by US and Europe which returned 0.9 and 0.6 per cent respectively.

Asian and Emerging market equities also contributed strongly to the performance of global equities, with the MSCI AC Asia ex Japan and the MSCI Emerging Market index rising 1.8 and two per cent respectively. Strong gains were seen across most sub-regions, with Greater China, Latin American and Emerging Europe doing well.

In Greater China, Chinese equities rose 2.4 per cent to end the week as the best performing Asian market, with Hong Kong and Taiwan delivering returns of 1.2 per cent each. Singapore and Thai equities stood out amongst its Asean peers, with a 1.9 per cent gain for the latter and a 1.6 per cent return for the former in the first week of trading in 2018.

Singapore gained as a better than expected reading of economic growth fuelled positivity in the local bourse. Other single country Asian markets under our coverage also ended the week in positive territory with slightly more muted gains.

In Emerging markets ex Asia, Brazil and Russia delivered outsized gains relative to their other single country peers. The Brazilian Bovespa index rose 4.1 per cent to cap the week as the best performing market under our coverage, while Russia rose 3.9 per cent over the course of the week. Meanwhile, India’s SENSEX Index saw a 0.5 per cent fall over the week.


Singapore: 2017 GDP growth surprises to the upside

Based on advanced estimates, Singapore’s GDP grew 3.1 per cent year-on-year in 4Q17, bringing growth for the full year 2017 to come in at 3.5 per cent. Both figures had surpassed market expectations of 2.6 per cent year-on-year growth and 3.3 per cent growth respectively.

The manufacturing sector, which makes up approximately a fifth of Singapore’s economy, had been the main driver of growth, as it expanded 10.5 per cent in 2017, up from 3.6 per cent in 2016. Contrastingly, the construction sector had been a laggard, as it contracted -8.1 per cent in 2017, down from a 0.2 per cent growth in 2016.

Meanwhile, services producing industries grew 2.5 per cent in 2017, up from one per cent in 2016. Over the coming quarters, while the manufacturing sector’s growth may moderate from its highs in 2017, an increasingly broad-based growth is likely amongst other sectors, leading to sustained economic growth.


India: Manufacturing PMI sees sharpest improvement since December 2012

Nikkei India Manufacturing Purchasing Managers’ Index (PMI) rose to 54.7 in December as against 52.6 in November. This is the strongest improvement seen in this sector since the last five years. The rise in the indicator could be attributed to the sharpest increase in output and new orders since December 2012 and October 2016 respectively.

The increase in output was helped by high order book volumes and improved demand conditions. New Business inflows also led to a sharp rise in job creation, which was the fastest since August 2012.

The month of December also saw pressure on manufacturers cost burdens as a result of the introduction of Goods and Services Tax (GST). As such input cost inflation rose to the strongest levels since April and this in turn made firms increase their average selling prices.


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