By Margaret Yang, CMC Markets
Equity markets extended their third day of rallying as the Bank of England hinted that more monetary stimulus is on the roadmap to battle the post-Brexit economic fallout. The S&P 500 index soared another 1.36% and closed at 2098.8 points, getting closer to the strong resistance zone between 2,100 and 2,120.
The Singapore stock market has embraced a strong rebound this week, led by defensive names and Real-Estate Investment Trusts. In fact, the Singapore stock market is traded at a relatively low valuation among its regional peers – 11.5 times trailing price to earnings and 1.1 times price to book.
The benchmark Straits Times Index is traded with trailing dividend yield of around 4%, which makes it attractive in the low-yield environment today. And Singapore is now one of only a few ‘AAA’ rated countries with positive sovereign bond yields.
Sterling was being sold down last night as the market starts to prepare for either rates to be cut to a historical low, or for more monetary easing. The weak pound will help to boost the UK’s exports and lead to higher inflation in the next couple of months. A further rate cut will give London property prices the support that is much needed, anticipating reducing tenant demand and less foreign investment in a post-Brexit world.
The Japanese yen has moved back to the 102.80 area against the US dollar having touched 99.00 at the end of last week. This not only signals unwinding risk premiums, but also building up expectations that the BOJ will intervene in the currency market should the yen strengthen further across their critical line. Moving forward, there is probably more upside risk than the downside for USD/JPY, as the market now sees a greater chance of the BOJ easing in their next policy meeting at the end of July.
US SPX 500 - Cash
Margaret Yang Yan, CFA, is a market analyst for CMC Markets Singapore.