Singapore Markets Morning Briefing - what you need to know for Mon March 12, 2012

Modest gains closed the past week for US stocks, while the Nikkei is off to a positive start.

IG Markets Singapore said:

Singapore traders had been hoping for the dust to settle on the Greek debt swap before working out their next move. But they won’t have much time with China’s trade deficit now muddying the waters.

The picture of the global economy’s health is as hazy as a Beijing skyline. On the one hand, Greece appears to be saved for now by a forceful debt swap. This makes the eurozone’s future look safer while the US is continuing to slowly recover with improving employment figures.

But there are also big worries about China’s slowdown, supported by the weekend’s revelations that its trade balance plunged $31.5 billion into the red in February as exports slumped. And euro sceptics are quick to point out Greece’s problems are the tip of the iceberg, with Portugal, Spain, Italy and Ireland all on the fringes of default. Plus Greece could also need bailout version 3.

All this uncertainty could lead to another cautious week for Singapore which had a rollercoaster ride last week. Figures show that traders in Singapore have been reducing their exposure to equities, not just across the region but US stocks also.

While the figures don’t capture the renewed optimism in the US economy, they do highlight how willing traders are to sell-up and sit things out until things look clearer for global markets.

RBS, on the other hand, reported (for 9 March 2012 trading):

Treasuries bear steepened today after a slightly better than expected Employment report and higher stocks put next week's supply front and center for fixed income traders.

We saw better buying on the dip in general, with receiving in 10s from real money, central bank buying in 2s and 10s, and some foreign real money selling in 7s.

In TIPS, we saw small better buying across the curve. An uptick in gas gave some life to the front end, and breakevens ground to 3-4 wider.

Total Treasury broker volume today was 105% of the 10-day average.

OCBC Investment Research meanwhile noted:

The modest gains on Wall Street last Friday night and the positive Nikkei start (+0.6% currently) could inspire the local bourse to a mildly optimistic start this morning.

However, it is unlikely that we will see any strong rally today as the STI has displayed signs of weakening upside momentum in the previous session; despite gaining as much as 0.6% at one stage, the index retreated to end Friday more than 0.2% in the red.

For now, the index could continue to drift lower steadily within its near 1-month downtrend channel with the immediate base still marked at the 2900 key resistance-turned-support, with the subsequent support lying at 2874 (minor trough in Jan '12).

On the upside, we still see 3000 as the key obstacle to overcome in the near term, with the subsequent resistance pegged at 3030 (key peak in Feb '12).