Singapore Markets Morning Briefing - what you need to know for Mon March 19, 2012

The STI pushed through the 3,000 mark, and traders are seemingly more bullish.

IG Markets Singapore said:

It seems traders are becoming more bullish with every week that passes. With a total eurozone meltdown in the rearview mirror and a US economic recovery gaining traction there is plenty to be positive about.

And the bulls seem to be on top right now with Wall Street hitting heights it hasn’t seen since before the Global Financial Crisis. Last week the S&P 500 broke through the 1,400 mark, its highest level for almost four years.

Meanwhile, the STI pushed through the 3,000 mark and still sits there as we start a new week, despite some niggling doubts about how hard China’s landing will eventually be.

Traders are now talking about a breakout which could see the STI hit 3,200 within the next few months as investor confidence goes up a notch. With the finger clearly on a green button marked “risk on” it seems the good times are rolling.

But the bears are still worried that we are jumping the gun on a recovery, focusing on the good news while ignoring the deep concerns within the world economy that haven’t just disappeared this year.

Huge eurozone government debts, a US economy still vulnerable despite continued signs of recovery, China’s shaky slowdown, a reliance on cheap central bank funding, rising oil prices and sticky inflation all spring to mind.

RBS, on the other hand, reported (for 16 March 2012 trading):

Today's moves were encouraging but do not quite signal an all clear for the long end. Anecdotally there continues to be an impression of money waiting to go into yield (Treasuries, MBS, and credit), if only we can have some stabilization ahead of key support levels such at 2.40% in 10yrs.

A notable positive is that the market showed an ability to withstand another trip towards support, closing well off the lows. On the flip side, we still closed higher in yield on a close-to-close basis, showing that buyers are willing to step in at higher yields but right now are in no rush to pay up for securities.

We examine this and other dynamics more closely in our weekly, but to sum it up we feel 2s and 3s appear to be holding and we think money will be comfortable investing there, but while the rallies off support the last two sessions have been encouraging, the jury is still out on the long end.

OCBC Investment Research meanwhile noted:

Although the US market closed mixed and muted last Friday night, the positive Nikkei start (+0.3%) and the higher US index futures (+0.2%) is likely to cue the local bourse to a more optimistic opening this morning.

The STI ended 0.5% in the red last Friday, despite making a brief spike above the 3030 resistance to hit an intraday high of 3035.

But with today's tone likely to turn more upside biased, we could possibly see the index making another test of the 3030 (key peak in Feb '12) resistance again. A bullish break above this level could see it climbing towards the 3055 support-turned-resistance.

On the downside, 3000 psychological level is still the immediate support for now, with the subsequent base pegged at the 2900 key resistance-turned-support.