At the start of 2016, global bourses were trading with tremendous anxiety. In early 2016, many of the world’s major indices suffered declines of up to 20%. Much the same was true of the Singapore market. Now, things are a little different, with the S&P 500 index, the NASDAQ composite index, and the Dow Jones Industrial Average rising to near-record levels. Of course, the Trump Factor has fueled the recent surge in global indices. There is tremendous enthusiasm about the possibility of massive fiscal stimulus in the US. This, coupled with deregulation of the corporate sector, lower income tax and a policy of America first are generating hype with investors.
Whether or not President Donald Trump will be able to realize his dream for America is debatable. The Fed recently implemented a 25-basis point rate hike to the federal funds rate, now at 1%. This had a shock effect on the USD, which declined to a multi-month low, reversing gains on the DXY and driving dollar sales. Nonetheless, markets have generally reacted favorably to Trump’s presidency, and barring a shock reversal, US indices and bourses around the world are likely to continue inching higher.
How is the Straits Times index performing?
The Straits Times Index (STI) is calculated and maintained by the FTSE. It is a benchmark index which determines the overall health of the Singapore economy. It has been operational since 1996 and it features 30 of the biggest and most liquid companies listed in Singapore. Currently, the Straits Times Index is trading at 3,126.93, up 0.28% or 8.74 points. It has a 52-week range of 2,703.48 on the low end and 3,177.90 on the high-end. Its 1-year return is 14.30%, and for the year to date, it is already 8.55% in the black. The 30-member index currently had 20 members up on Thursday, 23 March 2017, and just 6 members down. Clearly, the performance of the STI is bullish, and traders are going all in with call options.
At the start of 2016, the index plunged to around 2,500 points, but now it is roaring well above the 3,100 level, with gains of 25% plus. A couple of months ago, many of the blue-chip stocks listed on the index (Keppel Corporation Limited, DBS Group Holdings Limited and Sembcorp Industries) were eschewed by investors across the board. Now, they’ve realized gains of 40% + and they are roaring. This is in sync with the performance of the Singapore economy overall, which has been a star performer among the Asian Tigers. Investors are now fully on board with a resurgence in equities markets, despite a slight pullback in the USD in recent days. Markets are now significantly higher than they were early in 2016, and this bodes well for call options.
Investment Tips for Trading in Singapore Markets
Value-driven investments and growth-driven investments are abundant in Singapore. Top stocks like Raffles Medical Group Limited have a price/earnings ratio of approximately 35. The company has strong growth prospects, especially since it has a huge development with China. Regardless of which stocks are invested in, the consensus among investors is that the lowest possible price paid for stock is best since this affects the profit potential as the stock rises. For options traders, this is not necessarily the case.
Provided an asset, index, commodity, or currency pair moves in a specific direction, profits can be generated to the upside or the downside. Since these assets can be traded with ease, there’s no need to hold onto them for inordinate periods of time. Traders are encouraged to stick to the mood of the moment. In Singapore, that is decidedly optimistic, and this warrants call options. A massive influx of global funds is coming to Singapore, as the Monetary Authority of Singapore recently proposed a new corporate structure for investments in the country. This is one of the economic indicators that traders will want to be aware vis-à-vis trading activity.
Luis Aureliano, a business writer and financial analyst. With over 15 years of experience in global finance and an MBA in economics and management, Luis’s areas of expertise include business, marketing, communications, personal finance, macro economics, stocks and emerging markets.