The Straits Times Index (STI) rose by eight points week-on-week to end the week of Jan 13-17 at 3,810. This puts the index very much within a narrow trading range, and this trend may persist through the week of Jan 20-24.
The previous breakout level of 3,800 now-turned-support appears to have held and the 50-day moving average, currently at 3,776, appears to be acting as a support line. It remains to be seen if the moving average can hold as it moves towards 3,800.
ADX is falling, and the DIs are neutral, indicating that the index may continue to trend within a sideways range. On Jan 8, the STI made a new high of 3,886 and this is likely to be the resistance level for some weeks.
Elsewhere, China’s GDP growth in 4Q2024 of 5.4% y-o-y was above expections. Robert Gilhooly, senior emerging markets economist, abrdn, says this could imply that the whole-economy price deflation has ended, reducing the risk that rising real rates offset some of the policy easing.
“We may need to see another positive print or two before markets are convinced that deflationary risks have receded – the surprise rebound in the deflator is somewhat at odds with ongoing weakness in consumer, producer and export prices,” Gilhooly mulls.
“Given the likely lag in transmission between the end-September policy pivot and the impact on the economy, this could imply that the bulk of the policy loosening is still to work its way into activity — this should help provide much needed momentum into 2025 as the question of a trade war with the US is one of scale and magnitude,” he adds.
See also: STI experiences temporary correction as high risk-free rates cloud outlook for S-REITs
The most liquid proxy for China is the Lion-OCBC Securities HSTECH ETF which mirrors the movement of the Hang Seng Tech Index. The ETF has built a secondary base around 72 cents and resistance appears at 76.7 cents.
Short-term RSI has managed to rebound above its equilibrium line suggesting that this move could have legs. In this event, the HSTECH ETF may attempt to challenge its resistance at 76.7 cents.
A breakout may not materialise in the week of Jan 20-24, but there could be a more successful attempt at a breakout when the year of the snake begins.
See also: STI tests resistance, may attempt breakout
Finally, RHB Bank’s acting group chief economist, Barnabas Gan, has a “counter-consensus” view on the direction of interest rates. He believes that that there will be three US Fed Funds Rate cuts this year with the earliest cut to materialise in 2Q2025.
If so, the S-REITs would benefit. For the time being, the REITs are not acting like they will be swept up in the euphoria of a tailwind of cuts.
