News that US President Donald Trump will turn his attention to the long-awaited tax reform agenda – as well as a slew of economic data from the United States and China – will likely set the tone for markets across Asia this week.
Singapore, along with most of Asia, proved somewhat resilient last week, closing 0.2 per cent higher for the week. A short trading week lies ahead, with markets here closed on Friday for Hari Raya Haji.
The much-anticipated speech by Federal Reserve chair Janet Yellen at Jackson Hole, Wyoming, barely caused a ripple on Wall Street last Friday as she gave no hint on monetary policy, leaving the outlook over further interest rate hikes up in the air.
But traders are now looking to the long-awaited US tax reform agenda.
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“Starting (this) week, the President’s agenda and calendar are going to revolve around tax reform,” National Economic Council director Gary Cohn said last Friday. “He will start being on the road… justifying the reasoning for tax reform and why we need it in the US.”
Mr Cohn indicated that Mr Trump will begin the push with a speech in Missouri, the first in a series of addresses designed to convince Americans about the need to revamp the tax system.
Investors will also have plenty of data from the US and China to digest this week, starting with US second-quarter economic growth data on Wednesday. China’s official Purchasing Managers’ Index data is due to be released on Thursday, and the private Caixin gauge on Friday.
Also keenly watched is the US August non-farm payroll data, also due out on Friday.
An upward revision to 2.7 per cent quarter-on-quarter US economic growth is widely expected, while China’s manufacturing data is expected to slow slightly but still remain in expansion mode.
In Singapore, local stocks are in a consolidation phase after the second-quarter results season ended with a modest downward adjustment to earnings for stocks under DBS Equity Research’s coverage.
The brokerage said the results season showed that the economic recovery has benefited only selective segments of the economy such as property and technology, while the other sectors saw mixed adjustments or cuts to earnings.
“With the headline year-on-year gross domestic product growth likely to moderate from fourth quarter this year, it remains to be seen if the earnings revision trend is able to turn positive,” DBS analyst Yeo Kee Yan said.
Venture Corp, Hi-P International and Sunningdale Tech reported better-than-expected earnings on the back of a cyclical recovery in the technology manufacturing sector.
CapitaLand and Perennial Real Estate benefited from higher revaluation gains, while Frasers Centrepoint’s earnings were underpinned by higher recognition from completion of development properties.
Most other sectors suffered low to medium single-digit earnings cuts. For banks, the brokerage trimmed earnings for United Overseas Bank as new non-performing loans ticked up, offsetting an upward revision for OCBC. The industrial sector saw the highest percentage of earning disappointments, it said.