Bull run continues with buying spree

Bull run continues with buying spree
PHOTO: Bull run continues with buying spree

SINGAPORE - The bull run that drove local shares to a five-year high on Wednesday showed no signs of slowing yesterday, as investors continued to pile into the market.

The buying surge pushed the benchmark Straits Times Index (STI) up 19.76 points to close at 3,432.78 - its best finish since January 2008.

The exuberance in the local market was reflected in some markets across the region, though the fire appeared to have gone out of others.

The Korean market index rose 1.2 per cent, but Hong Kong's Hang Seng Index fell 0.14, while Japan's Nikkei slid 0.66 per cent.

The broader view is more buoyant with the STI up 8.4 per cent this year, well ahead of Hong Kong's 2.5 per cent rise and the 4.6 per cent lift recorded in Malaysia. However, it is trumped by the 11.8 per cent increase in Australia and Nikkei's remarkable 36.5 per cent surge in Japan.

The rally is being fuelled by a number of factors, said CIMB economist Song Seng Wun.

Investors around the world are scooping up shares in anticipation of stronger earnings later in the year, on the back of perceptions that the global economy has turned and that the United States is on more stable footing.

Wall Street has been setting the pace. The Dow Jones Industrial Average ended at 15,105.12 on Wednesday after closing at 15,056.20 on Tuesday, the first time it had closed above 15,000 points.

It is now up 16.32 per cent for the year.

Markets - typically perceived to be nine months to a year ahead of the real economy - appear to be pricing in strong growth, yet the underlying economic fundamentals have not changed significantly, said Mr Song.

"We should be slightly nervous that we have not seen real fundamental improvements, yet the market is pricing in improvements in the macroeconomic environment," he added.

Monetary policy easing - financial jargon for interest-rate cuts - in South Korea, Japan and Australia, and most notably the US, has also contributed to the flow of funds.

"This is an indication that the low interest-rate environment could be here to stay for a while more," said Mr Song.

Mr Kelvin Tay, regional chief investment officer for Southern Asia-Pacific at UBS Wealth Management, said equities in Asia - excluding Japan - performed well last month, after a poor showing in the first quarter.

"We expect this outperformance to continue given the market's still-attractive valuations and good growth prospects," he said. The markets in South Korea and India are tipped to be the strongest performers, he added.

Mr Tay said as a defensive market, Singapore tends to outperform during periods of risk aversion. "When positive US data, receding concerns over Cyprus and the easing of tensions between North and South Korea in April led to a recovery in risk appetite, and a surge in Asia (excluding Japan) market performance, Singapore underperformed," he said.

chiaym@sph.com.sg


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