Global equity markets posted mixed result over the week ended 16 June 2017, with the MSCI AC World Index gaining 0.10%. The S&P 500 Index remained little changed with 0.30% gain, while the Stoxx 600 Index fell -0.29%. The Nikkei 225 Index also retreated by -0.41% over the week. Asia and emerging markets edged lower over the week as a persistent weakness in oil prices dampened risk sentiment, with the MSCI Asia ex Japan Index and the MSCI Emerging Markets Index incurring losses of -1.25% and -1.24% respectively.
Over in East Asia, Korea, Hong Kong and Taiwan saw their respective equity indices recede -1.43%, -1.35% and -0.85% respectively. China's HSML100 Index fell -1.73%, while its onshore equity markets, namely the Shanghai Composite Index and the Shanghai Shenzhen CSI300 Index, declined by a more modest -0.98% and -1.47% respectively. In Southeast Asia, Singapore's Straits Times Index Index shed -0.37% while Malaysia's KLCI delivered a tepid gain of 0.14%. Indonesia's JCI Index and Thailand's SET Index were the bright spots amongst equity markets this week, with gains of 1.17% and 1.13% respectively. In other emerging markets, Brazil's Bovespa Index and India's SENSEX Index slid -1.19% and -0.55%, while Russia's RTSI$ Index took a tumble by -4.29% on further oil price weakness. A continued increase in US rig count has led oil prices to move downward by a further -2.14% to end the week at USD 44.74 per barrel.
In the coming week, the US is slated to release its new and existing home sales data for the month of May 2017, with expectations for new home sales to come in at 591,000 (4% increase month-on-month), while existing home sales are expected to be unchanged from last month. Investors will also be on the lookout for the world's largest economy's Markit Manufacturing PMI (preliminary estimates for June 2017) which will be released on Friday. Additionally, also releasing PMI numbers on Friday are the Eurozone and Japan. Back home, Singapore is slated to release, on Friday, inflation and industrial production data for the month of May, both of which are expected to increase from April's numbers.
[All returns in MYR terms unless otherwise stated]
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Market Valuation As Of 20 June 2017 for more details.
US: Housing Starts Lower Than Expected For Third Consecutive Month
The US Department of Commerce reported that housing starts in the US fell to 1.092 million in May, down -5.9% month-on-month from a downward-revised 1.156 million in April and falling short of the consensus estimate of a 1.22 million (an expected 5.5% month-on-month increase). Total building permits fell -4.9% month-on-month as single-family permits, which accounts for a significant share of the residential housing market, fell month-on-month for the third consecutive month by -1.9%. On a year-on-year basis, building permits fell -0.8%, its first negative year-on-year growth rate since the start of the year. While the momentum in the US residential housing market had been strong in 1Q 2017, recent weak housing starts indicate a deceleration in the market's momentum in 2Q 2017 and, should the weak data persist, this could create risks to growth in the coming quarters.
Germany: ZEW Readings In June Moderate Lower
Germany's ZEW Institute in Mannheim reported that its survey readings of current situation came in at an 88.0 reading in June, rising from May's 83.9 and beating consensus estimates of an 85.0 reading for the month. On the other hand, the ZEW survey of expectations of economic growth came in at an 18.6 reading, decreasing from a prior 20.6 and falling short of the consensus target of 21.7. Despite June's readings falling short of expectations, the readings could suggest that the initially rather high level of optimism among the investor community is moderating, with growth momentum remaining intact and the financial community warming up as perceived political risks in the Eurozone subside.
Japan: Signals Not All Weak Despite Disappointing April Core Machinery Orders
On a seasonally-adjusted month-on-month basis, the total value of Japan’s machinery orders increased 2.7% in April 2017. Meanwhile, Japan’s core machinery orders (machinery orders excluding shipbuilding and utilities) fell -3.1 percent in April, below market expectations for a 0.5% increase and down from prior month’s 1.4%. Machinery orders from manufacturers continued to increase by 2.5% in April, up from 0.6% in March, while machinery orders from non-manufacturers declined -5.0% in April, down from -3.9% in March. While Japan’s core machinery orders for April have disappointed, looking ahead, the signals don’t seem all weak given strong corporate profits in 1Q 2017 which could encourage higher levels of capital expenditures in the coming quarters.
India: Inflation Slows In May 2017
India's consumer price inflation came in at 2.18% year-on-year in May 2017, down from 2.99% the month before. Food inflation fell into negative territory (-0.22%), down from 1.21% in April, Meanwhile, fuel inflation moderated to 5.46% year-on-year in May, down from 6.13% in April, while miscellaneous inflation decelerated to 3.81% year-on-year from 4.25% in the previous month. Overall, headline inflation has come in line with RBI's revised inflation forecast of 2 – 3.5% in the first half of FY 2018. While the decline in inflation has contributed to favourable conditions for interest rate cuts, it remains likely that the RBI would continue to monitor inflation before cutting rates in the near term, as upside risks due to the implementation of seventh pay commission, fiscal slippages on account of farm loan waiver as well as global political and financial risks still persist.
Singapore: Retail Sales Growth Highest Since August 2016, NODX Decline For Second Consecutive Month
Singapore's retail sales rose 2.6% year-on-year for the month of April 2017, extending prior month's increase and coming in as fastest rate of increase since August 2016. Retail sales had risen strongly despite weak motor vehicle sales, the usual driver of the increase in retail sales, which fell -6.4% year-on-year in April. Excluding motor vehicles, retail sales rose 4.9% year-on-year, the strongest growth rate in more than 2 years. Looking ahead, it remains likely that motor vehicles sales will continue to be a major contributor to retail sales and that retail sales would continue to be volatile. Singapore's improving economy is likely to support consumer confidence and lead to a moderation or slowing in the increase of unemployment rate over the coming quarters which should in turn see retail sales supported.
Singapore's non-oil domestic exports (NODX) decreased year-on-year (by -1.2%) for the second consecutive month in May 2017 due to the decrease in non-electronic NODX (-9.0% year-on-year in May, down from -2.9% in April). Contributing the greatest to decline in non-electronic NODX, but are currently not expected to continue declining over the coming quarters, were civil engineering equipment parts (-92.5%), nonmonetary gold (-24.6%) and pharmaceuticals (-14.2%). Meanwhile, electronic NODX had continued to climb and increased for the seventh consecutive month, by 23.3% year-on-year in May, its highest year-on-year growth rate since March 2012. Looking ahead, it remains likely that the city's exports would be supported, particularly by strong electronic NODX amid good global demand for semiconductors as well as supported regional economic growth which should in turn support the demand for Singapore's exports.