Singapore stocks rally amidst US elections: SGX

The possibility of trade tensions abating boosted investor sentiment.

Investor sentiment boomed last week as hopes for a de-escalation of trade tensions dawned following developments in the US presidential elections.

The Straits Times Index rallied more than 6% per day from 2-6 November, the Singapore Exchange (SGX) said in a report, only one of the two APAC benchmarks to rally 6% daily along with South Korea’s KOSPI.

Whilst much commentary has revolved around the pending fiscal stimulus and effective plans to deal with the coronavirus in the US, investors might also have pinned their hopes in the potential for a de-escalation of the US-China trade tensions, the bourse noted.

Furthermore, the positive impact of the potential course correction in trade tensions was also powered by high levels of liquidity in the USD, the global reserve currency.

In October 2020, AAS Economics’ proprietary gauge for US money supply grew by 59% YoY, which was slightly down from the peak in August of 65% but still very elevated, and compared to 5% at the end- 2019. At the same time the annual growth rate of the Federal Reserve balance sheet (total assets) for early November is at 77 after peaking back in June at 86%.

These liquidity provisions are supporting businesses in the US economy, and by extension the global economy, to help offset the economic dishevel brought on by policies to combat the pandemic, SGX said.

Since trade tensions began, the FTSE All-Share ASEAN Index generated a decline in total return of 15.3% with Singapore stocks currently making up 24.5% of the index.

The declines of the STI and FTSE ST All-Share Index, since the end of 2017, were closely aligned with the region, with respective declines of 15% and 13.4%, the bourse noted.