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Crude oil rebounds on hope of new freeze talk

By Margaret Yang, CMC Markets

Commodities – Crude oil prices climbed higher after Iraq mentioned new freeze talks and US crude output fell. WTI oil futures closed up 3.8% to $44.18 before sliding to $43.67 this morning. The panic associated with the Doha meeting failure gradually faded away and the market has started to look forward. Last week’s US commercial crude oil inventories increased by 2.08 million barrels, less than market expectation. However the total inventory of 538.6 million barrels is still at an historical high. US domestic crude production slid 0.26% to 8.953 million barrels per day from 8.977 million a week ago.

Equities –The Shanghai Composite plunged 2.31% and closed below 3,000 points yesterday. The Hang Seng Index lost 0.93%. A lot of reasons behind the selloff were discussed: firstly, the market is worried that rising inflation will eventually lead to tighter monetary policy; secondly, profit taking was observed after the index rebounded from 2,650 to 3,050 points. Lastly, a joke was spreading through the market, attributing the slump to the "sell before exam" effect. According to the new rules and regulations, thousands of private equity chiefs and fund managers will need to go for the fund qualification certificate exam on 23rd Apr, this coming Sunday.

However, investors should not be overly pessimistic about this slump. Let's look at another important data released yesterday: China's first quarter property loans soared 22.2% year on year, signalling a strong rebound in China's property market. Indicators across the board such as property investment, sales and new developments were all picking up. Revived property related activities will buffer a slowing economy and may support rebounding commodity prices such as iron ore.

The immediate support level for the Shanghai Composite is at 2,905 and the resistance level is 3,085.

Singapore Exchange (SGX) announced quarterly earnings of $89 million and declared an interim dividend of 5 cents, up from the previous 4 cents. Its revenue and net profit went up 3% and 1% respectively, in line with expectation. The growth comes from increased trading activity in the volatile equity and commodity markets at the beginning of this year. Revenues have grown marginally across its three main business lines, namely equity and fixed income, derivatives, market data and connectivity.

CapitaLand 1Q earnings, measured by total Profit after Tax and Minority Interest (PATMI) rose 35.4% year on year to S$218.3 million. This is mainly due to the fair value gain realised from the divestment of a property in Beijing. The adjusted operating PATMI grew 10.6% on account of higher contributions from development projects in China, new contribution from CapitaGreen, and better operating performance for the shopping mall and serviced residence businesses. Earnings per share (EPS) climbed to S$0.051, marginally beating expectations of $0.050.

Crude Oil West Texas June 2016

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About the author

Margaret Yang Yan, CFA, is a market analyst for CMC Markets Singapore.