Ghost month could continue ‘negative' market trend in 2018

The Singapore market saw a median decline of 2.1% in August the past 10 years.

The trend for a ‘negative August’ could continue for the Singapore market as it always ended lower in the ghost month over the past 10 years with a median of 2.1% and an average fall of 4.2%, said DBS Equity Research.

DBS believes that the trend could be backed up by trade war uncertainties, weak domestic driver amidst the property curbs, and the lack of positive catalysts.

“In our recent marketing trips to Hong Kong, Singapore, Bangkok, and Kuala Lumpur, investors are generally cautious,” DBS commented. “Although cash levels are higher post-May/June sell down, investors are awaiting clearer indications on the earnings’ growth outlook and for trade war tensions to clear up before taking a more aggressive stance.”

Also read: STI falls 10% from peak over trade tension woes

DBS mentioned that US government’s consideration of a higher 25% tariff on US$200b of Chinese imports pushed trade war fears amongst Asian equities.

“We continue to advocate a defensive stance, our picks are stocks that are less cyclical in nature with consistent dividend payouts in net cash with decent growth of near 5%,” the bank noted.

The 25% tariffs on US$16b Chinese imports could be pushed this month whilst the public hearing on the proposed 10% tariffs on US$200b Chinese imports is likely to occur on 20 August, followed by enactment as early as September.