STI set to open higher following 0.6% gain

The strong Nikkei start and the rally on Wall Street are likely to provide further inspiration, says OCBC Investment Research.

OCBC Investment Research said:

The rally on Wall Street overnight and the strong Nikkei start (up 1% now) are likely to provide further inspiration to the local bourse this morning.

As a recap, the STI climbed higher to a 0.6% gain at the close yesterday despite less than optimistic showings by most of the other Asian bourses.

And with today's sentiment likely to remain more upside biased, we could see the index heading higher for a test at the 2850 resistance (recent peak).

Beyond that, the next key obstacle lies at the 2900 key support-turned-resistance. On the downside, the immediate base is pegged at the 2800 psychological support, with the subsequent support marked at the 2735 minor trough.

IG Markets Singapore meanwhile noted:

Despite the positive performance of the STI, yesterday’s poor Asian session was followed by a rally fuelled by QE expectations, which suggests anything other than all guns blazing from the Fed later may well disappoint markets.

We have to face facts, no action or limited action such as an extension to the existing ‘operation twist’, are actually just as likely as a big play from the Fed at this point in time.

The wait and see approach adopted until this point in time may well seem the best course of action, as with many of the central banks it seems to have less options available to stimulate the economy now than ever before. This lack of options and the possibility of the situation continuing to deteriorate from here for the global economy mean it may well keep what many see as its final play in the locker for now.

With expectations rife, we saw solid gains for European and US equities, risk currencies flourish and even oil manage to advance, despite continuing slow progress in the talks between Iran and EU nations.

All of this means we are pricing the benchmark indices to open around 0.9% higher in Singapore this morning. This is in-line with other Asian markets as we look to extend the equity gains we have seen so far this week.