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US Fell For The Fifth Consecutive Session. Asian Markets To Follow?
Perspective | 31 December 2012
By: Ernest Lim
Articles (134) Profile

Asian stocks registered their sixth consecutive weekly gain, the longest winning streak since March amid optimism that Japan and China will enact more pro-growth policies.

As mentioned last month, without a resolution on the fiscal cliff and with fund managers closing their books ahead of the year end, S&P500 is unlikely to notch a higher high than in September without a pullback. Referring to Chart 1, although the index managed to breach the significant resistance around 1,425–1,433 and hit an intraday high of 1,448 on 18 Dec-12, it dipped below that resistance level in a span of five trading days and did not notch a higher high than in September. For the month through 28 Dec-12, S&P500 was down 1% and closed at 1,402 on 28 Dec-12. S&P futures dipped as much as 1.9% after the close of trade. Key levels to watch are around 1,386 (historical support, coupled with 200D EMA) and 1,343 (low seen on 16 Nov).

Table 1: Indices’ Performance Over The Past Month

Source: Bloomberg, Ernest's compilations

Chart 1: S&P500 – key levels around 1,386 and 1,343

Source: CIMB itrade platform complimentary charts

Looking ahead, it is a holiday shortened week. The discussions on the fiscal cliff are likely to continue to dominate the headlines. In addition, concerns on the debt ceiling may start to surface in the next few weeks. Aside from this, there are some noteworthy economic data to watch out for this week. For example, China will release the Manufacturing (comprises of HSBC and China’s official Manufacturing PMI data separately) and Non Manufacturing PMI on Monday, Tuesday and Thursday respectively. US ISM Manufacturing PMI, FOMC Minutes and Non Manfacturing PMI to be released on Wednesday, Thursday and Friday respectively would also be of significance. In addition, US would also release ADP Non-Farm Employment Change, Non-Farm Employment Change and Unemployment Rate on Thursday and Friday respectively. (Please refer to “Summary of Economic Calendar for the Week ahead (SIN time)” below for a more comprehensive list of important economic events.)

As Asian markets have notched their sixth weekly gains, it is likely to be prone to pullbacks especially when the US markets have already started to pull back since a week ago.

For our STI, it has breached the resistance of around 3,106-3,120. Similarly, with the pullback in the US markets, STI is likely to pull back in tandem with the general market. There may be some stocks which may be worth to nibble on pullbacks but this depends on the price, time and the broader market situation.

All the best for your investment and trading!

Please note that the above is my personal opinion and may not cater to your specific risk profile etc. The questions of when to buy/sell and what to buy/sell differ greatly from individual to individual. Furthermore, it is extremely important to bear in mind that the market outlook is never static. It can change suddenly if there are sudden big events unfolding in the market – some events can happen as quickly as a few hours.

STI supports and resistances are:

Current: 3,191.80

Support 1: 3,163

Support 2: 3,155

Support 3: 3,133-3,136

Support 4: 3,120

Support 5: 3,106

Resistance 1: 3,196

Resistance 2: 3,205

Resistance 3: 3,222 – 3,227

Resistance 4: 3,245

Resistance 5: 3,259

*Supports and resistances are not static levels. They may be subject to change daily.

Summary Of Economic Calendar For The Week Ahead (SIN time)

31 Dec, Mon: (CNY) HSBC Final Manufacturing PMI;

1 Jan, Tues: (CNY) Manufacturing PMI;

2 Jan, Wed: (EUR) Spanish, Italian, Europe Final Manufacturing PMI; (GBP) Manufacturing PMI; (USD) ISM Manufacturing PMI / Final Manufacturing PMI;

3 Jan, Thurs: (CNY) Non-Manufacturing PMI; (GBP) Construction PMI; (USD) ADP Non-Farm Employment Change / Unemployment Claims / FOMC Meeting Minutes;

4 Jan, Fri: (GBP) Services PMI; (EUR) German Retail Sales / Spanish, Italian and Europe Final Services PMI; (USD) Non-Farm Employment Change / Unemployment Rate / ISM Non-Manufacturing PMI / Factory Orders / Crude Oil Inventories / FOMC Member Yellen Speaks;

*All economic data especially China data (if any) are subject to changes without notice. The above list is not exhaustive. I have merely listed the economic data which I feel has more impact to the market.

*Major markets are closed on 1 Jan-13. In addition, Japan is closed from 31 Dec-12 to 3 Jan-13. China is closed from 1 to 3 Jan-13.

*Please refer to Forex Factory Calendar for a more detailed list of economic events.

*P.S: The above is part of a bi-weekly newsflash which I send out to my clients on a weekend.

*Information sources: Various sources such as Bloomberg, Dow Jones, Forex calendar, Zacks Investment Research, Reuters, SGX, Yahoo Finance, and Business Times etc.

Ernest Lim is a CFA, CA and has worked at GIC Special Investment. He has a solid feel of the markets and financial world and is now a remisier.

Please click here for more information about this author.


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