The risk-on rally of global asset prices seemed to be ‘unstoppable’ as major equity markets are likely to finish the week higher, following solid gains obtained over the last two weeks.
Upbeat China 4Q GDP data painted a brighter outlook for the year ahead, which will boost investors’ confidence in the world’s second largest economy.
China’s economy expanded at 6.8% in the last quarter of 2017, beating consensus forecast of 6.7% and lift the full year growth rate to 6.9% - well above policymaker’s full year target of ‘around 6.5%’. This also marks the first economic upswing observed since the country’s growth rate peaked in 2010. Quantity matters, but quality is even more important. By pushing forward the supply side reform and deleveraging campaign, the country is gradually shifting its economic from a ‘growth at any cost’ into a more service-oriented, environmental friendly and sustainable model.
The economic tailwind, alongside with strong currency, is likely to direct fund flow into the greater China market, especially Hong Kong. Yesterday, the southbound flow via the HK-Shanghai stock connection registered net flow of over 6 billion yuan – the highest daily inflow seen in over a year. Hang Seng index managed to surpass its 2007 peak and closed at all-time high of 32,121 points despite of some intraday volatility. China H-Shares continued to outperform the broader market partially due to the southbound inflow, narrowing the price gap between A-H companies. Sector wise financials (banks and insurance) continued to outperform.
Technically, the Hang Seng Index is riding a strong upward trend but momentum indicator RSI has stretched into the overbought zone above 70% for 13 trading sessions – which flags the risk of technical pullback. Downside, however, is cushioned by improved fundamental, ample liquidity and complacency sentiment, which will turn every technical pull back into a buying opportunity.
Singapore’s Straits Times index lost 20 points or 0.58% yesterday as bank shares retraced sharply on profit taking activities. The benchmark index is facing some resistance at 3,547 area, which is the high watermark inked in April 2015. The upcoming earnings on CapitaLand Mall Trust, CapitaLand Commercial Trust, Keppel Corp and A-REITs next week will help to paint a clearer picture of the stock market outlook.
Separately, US Commercial Crude inventory dropped 6.86 million barrels last week, more than market forecast of 3.45 million drop. This marks the 10th straight week of stockpile decrease, which is likely to provide support to crude prices amid worries of rising production from the North America.
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