S'pore market to take cue from key US data

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THE Singapore market will take its main cue this week from key United States
economic data as investors search for more clues on the pace of the global
recovery.

Despite a holiday-shortened week in the US, a slew of economic
indicators will be released this week.

The most keenly watched will be
Thursday's report on US unemployment and payrolls. These numbers are seen as
key indicators of economic momentum, and could give investors leads regarding
the timing and strength of a rebound from the crisis.

Investors will
also be monitoring key manufacturing surveys in New York and Chicago, including
the Institute for Supply Management index.

Market players will also
pay attention to the European Central Bank (ECB) briefing on Thursday and its
interest rate announcement. Analysts expect the ECB to keep interest rates at
1per cent and stress that rate hikes are still a long way off.

Last
week, the US Federal Reserve calmed markets by not changing its near-zero
interest rate policy and signalling it would keep its stimulus efforts on
track.

World Bank chief economist Justin Lin, who was in town last week,
said confidence in a sustained recovery would come only when a rally in
financial markets converges with a similar rebound in the real economy.

Last week, the Dow Jones Industrial Average slumped 1.19per cent for the
week to 8,438.39.

Generally, most investors have been coming out of
hiberation and have been willing to take more risk.

Citigroup said in a
global equity strategy report: 'Investor risk appetite is returning. Over the
last four months we have seen large outflows from traditional safe havens
including money market funds. Much of this money has flowed into riskier
credit and equity funds.'

It noted that the biggest flows within
equities are into emerging markets. So far, inflows this year to emerging
market equity funds have returned more than half of the outflows seen last
year.

Back home, the benchmark Straits Times Index closed at 2,317.95
points last Friday, up 44.77 points, or 1.97per cent from the previous
week.

However, trading volume continued to slump. Average daily volume
last week was just 1.39billion shares valued at $1.28billion, compared with
1.86billion shares worth $1.49billion the week before.

Although the
Singapore bourse appears to be in a consolidation phase as economic recovery
seems tentative, market experts say more upside is possible.

Local
stocks could also see mild gains from window dressing as the first half draws
to a close tomorrow.

UBS analysts said it was 'premature to judge that
the rally is over', 'in the absence of negative data points', such as 'renewed
growth weakness, rising inflation or withdrawal of policy easing'.

Kim
Eng believes there will be 'a more sustainable rally in the latter part of this
year' as more signs of green shoots emerge and the credit market loosens.

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