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Singapore The solid performance of the local stock market in the first quarter of this year may have lifted Singapore out of the gloom from late 2016, but analysts caution that the Republic is not in the clear yet. A pick-up in trade has helped drive demand in the region and the improved global market sentiments post-United States presidential elections have also contributed to a better scorecard.

Going forward, however, experts who spoke to TODAY are less optimistic about Singapore’s equities, saying the upward trend is already displaying signs of faltering. The sentiment-driven market will continue to be influenced by geopolitical risks, political issues and the US Federal Reserve’s tightening of policy.

The common stocks, Real Estate Investment Trusts (REITs) and Unit Trusts listed on the Singapore Exchange (SGX) collectively saw green in the first quarter of 2017, gaining by approximately 8.9 percent. While the Straits Times Index (STI), which covers large-cap equities, saw a stellar gain of about 9.5 percent during the same period,” said Mr Woon Tian Yong, investment analyst at Phillip Futures.

IG market strategist Ms Pan Jingyi noted that the Asian markets’ performance as a whole was better than expected. Comparing benchmark indices, Singapore’s local bourse had outperformed in the first quarter of 2017, helped by a lift in growth outlook for the economy. “Among sectors, property stocks have been going strong in the Singapore equity market, clocking some of the best gains on the local STI,” she said.

The first quarter saw a particularly cohesive period in its broad-based rally in Singapore equities, due in part to the return of confidence after the US presidential elections, said Mr. Woon.

Global equity markets (including Singapore’s) saw no major impediments to once again reach for the skies,” he said. The case was even more substantiated in the context of Singapore’s equity markets, as it saw largely beat down prices for most of 2016, thus missing out on much of the gains seen in equity markets elsewhere in the same period.

This resulted in Singapore equities broadly trading at a relative bargain as compared to their peers in the US equity space, drawing bargain hunters and buyers in general back to the markets.”

Going forward, Mr Nicholas Teo, a trading strategist at KGI Securities (Singapore) noted that it would be tough to expect a similar reading as from the first quarter. The market could see a pull back, he said.

Experts are keeping an eye on the “potentially upsetting developments in geopolitics between the US, the Middle East, China, North Korea and Europe, where elections in France are yet to play out.

The US monetary policy, which served as a key guidance for markets at the start of the year, looks to continue to influence the market going forward.Markets may see some signs of moderation in what could be an eventful second quarter, said Ms Pan. The change in the situation at the start of April highlights how geopolitical tensions may spark fear within the markets. Furthermore, the highly anticipated US pro-growth policies have yet to see the light of day, which places the pressure on US earnings to support markets.

Looking at the local STI, a strong psychological barrier at 3,200 has capped the rally and could remain a difficult hurdle to cross.

Defensives, such as Reits, may continue to appeal to the market, while bank stocks could see further rallies from factors such as the US interest rate tightening cycle coupled with an expected gradual improvement of the oil-and-gas sector.

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