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All eyes on key China PMI data and US debt-ceiling fight, Companies & Markets News & Top Stories

SINGAPORE – If you did not know what Evergrande was about a month or two ago, you would have had more than your fill over the past week.

The debt saga involving the China-based property giant has hogged the headlines all week and rattled market sentiment, not just in China and Hong Kong, but in South-east Asia as well.

While no one expects a Lehman Brothers-like global contagion which triggered the global financial crisis in 2008, the collapse of this company with over US$300 billion (S$406 billion) in debt will impact bond holders and equity investors, and could impact broader market sentiment.

But as of last Wednesday, the debt-laden property company had assured bond holders that it would honour interest payments. Meanwhile, China’s regulatory and financial authorities are already injecting cash into the banking system and markets to prevent financial contagion at home.

The other piece of news which captivated the market’s attention was the US Federal Reserve meeting. This turned out to be largely a non-event, with Fed chair Jerome Powell confirming what the market already knew about the tapering: that it could begin scaling back its bond buying programme through 2022 and 2023.

The Dow Jones Industrial index ended a volatile week 0.62 per cent higher at 34,798, while the broader S&P500 index edged up 0.51 per cent to 4,455.48 points. The tech heavy Nasdaq ended flat at 15,047.7 points.

In Singapore, the Straits Times Index slipped for the third consecutive week. At its close at 3,061.35 points last Friday, it is down 0.3 per cent down for the week. The benchmark index has given up 37.45 points over the past three weeks.

CapitaLand Investment (CLI) led both the STI and broader FTSE ST ALL-Share Index over the week. The stock debuted at $2.95 per share on Monday, with a low of $2.90 on Tuesday and a high of $3.51 on Friday, before closing at $3.30 on Friday. CLI’s average daily trading turnover over the five sessions at $106 million was markedly higher than CapitaLand’s average daily trading turnover of $37 million a day in the 2021 year through to Sept 9, and $33 million last year. There was noticeable net institutional buying of the stock through the week.

The biggest challenge for the Singapore market at the moment is the dearth of liquidity. Despite being deep in value, many stocks remain stuck at sub-valuation levels amid an absence of fresh fund inflows.

While there was a recent announcement of a Temasek Holdings-led initiative to pump some $1.5 billion to help companies raise capital through public listings, many market watchers reckon the equity market here could do with an injection of liquidity, possibly via funds from Temasek and the Central Provident Fund. Markets like Hong Kong market see steady support from such state-controlled domestic funds, they point out.

On the broader front, US macroeconomic data was weaker than expected, with flash September Purchasing Managers’ Index (PMI) below expectations, largely due to persistent supply chain issues.

But these numbers should bottom out soon over the next two months as vaccine rollouts and reflation pick up pace, say analysts.

September has generally been a notoriously difficult month for equity markets, and this year is proving to be no different.

But market experts like Mr Vasu Menon, executive director for investment strategy at OCBC Wealth Management, remain sanguine on the outlook.

“Overall, historical data shows that September has seasonally been a difficult period for US stocks, which has been the case this year,” he said. “However, history also shows that Wall Street tends to recover from setbacks in September and rebounds in the last quarter of the year.”

Key China PMI figures for September are due on Thursday and this will be closely scrutinised for signs of further weakness in the Chinese economy. Amid the Evergrande saga and regulatory crackdown of the private sector by the authorities, more bad news on the economic front will not augur well for stock prices, which have pulled back sharply since mid-February.

Another worry is a potential US debt default. If the debt ceiling is not lifted this week, the US Treasury Department could be forced into selective default.

In short, a US government shutdown could happen on Friday if the US Congress does not agree on a new budget package by Thursday. While a default is highly unlikely, political wrangling and a potential government shutdown could spur a temporary bout of market volatility.



All eyes on key China PMI data and US debt-ceiling fight, Companies & Markets News & Top Stories Source link All eyes on key China PMI data and US debt-ceiling fight, Companies & Markets News & Top Stories

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