Towards Financial Freedom
DBS Equity Research: Wired Daily 18 Dec 2015
Attempt at Capricorn Rally likely short-lived, STI short term resistances 2900, 2860
US stocks fell with major indices giving back most of the previous day gains as the initial relieve that FED has finally started the rate hike cycle following months of intense anticipation faded. The rate hike shows FED's confidence in the US economy but there's also the uncertainty of how fast rates will go up. Currently, consensus and FED median forecast differs by about 50bps.The FED's median forecast is for the Fed Funds rate to rise further by up to 100bps by end-2016 while consensus expects just a 50bps increase. Our observation is that during the previous rate hike cycles, the subsequent 1-3 months post first rate hike is negative for US stocks before things get better.
Stocks should start the session softer on the back of the overnight fall on Wall Street. Heading to the end of the year, we believe that any attempt at a 'Capricorn Rally' will be short-lived. The shadow of higher interest rates, more earnings disappointments during the upcoming 4QFY15 results season and uncertain growth outlook next year could be a near-term drag for equities. Short-term resistance for the STI is at slightly above 2900, immediate resistance 2860. Stocks could start the New Year with a 'thud' rather than a 'BOOM'.
Singapore's Nov non-oil domestic export (NODX) fell a worse-than-expected 3.3% y-o-y, worse than expectations for a 1.5% increase. The International Enterprise Singapore blamed "the contraction in non-electronic NODX that outweighed the increase in electronic NODX", for the drop in November's NODX. Pharmaceuticals slipped 12.5% last month after a 44.6% surge in October. Electronic NODX bounced back from a 3.2% fall to a 0.7% rise last month.
Source: DBS
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