Singapore shares show resilience in the US market, which one is the most traded?
The American stock market has had a rocky two weeks as investors continue to fear the impact of Coronavirus. Across different markets, this outbreak is a sobering reminder of how interconnected modern economies are.
Regardless, there is cause for optimism as different governments enact measures to try to contain the virus. The US Federal Reserve is likely to make further interest rate cuts down the road. A rate cut is a measure typically intended to boost spending, essentially creating a boon for the US stock market. President Donald Trump is keen on sustaining economic growth even if it means arm-twisting Fed chair Jerome Powell publicly.
Whether it is down to luck or preparation, Singapore has yet to have a Coronavirus fatality. Nonetheless, the fact that China, which is a significant regional player, is ground zero for the outbreak, means that the collateral damage reaches Singapore. Disruptions to global aviation and commerce are a problem, given the fact that Singapore is a regional economic hub that benefits from transit. The fallout from Covid-19 on shares is, therefore, is a very important topic of study.
Singapore Shares Showing Resilience
The past week saw a semblance of stability as the Dow Jones industrial Index regained some losses from its 12% drop in the last week of February. Still, markets are far from stable as oil prices add to the already serious Coronavirus outbreak.
Singapore shares did show resilience in the past week of trading. On March 3rd, the Straits Times Index gaining 31.89 points after the Dow Jones Index had jumped over 1,000 points. The investor enthusiasm comes despite the fact that South-East Asia is bearing the brunt of Coronavirus-related disruption. On Friday, however, US markets saw a drop again, as was the trend across most markets.
Last week, shares in Yangzijiang Shipbuilding Holdings Ltd (BS6) saw the highest volumes at about 64.89 million shares traded. The second most active stock was Rex International (5WH), which saw about 51.4 million shares traded to close out the week. These stocks did close out the week on a weaker footing as global markets continued to get pummeled by Covid-19 fears.
As this week starts, markets will likely see more selling because the failure of OPEC countries to reach a deal on oil supply has cratered oil prices. Besides, the disruptions to global supply chains caused by Coronavirus will continue to be a pressing matter.
Singapore ADRs in the US Market
An American Depositary Receipt is a certificate that allows a foreign company to trade shares on American stock exchanges. They are functionally similar to Global Depositary Receipts (GDRs). The ADRs are available during normal trading hours, and these companies have to pay dividends in US dollars.
At press time, most Singapore ADRs were in the red, much like most stocks. The most-traded was Sea Ltd (SE), with a volume of 5.8 million shares. Two ADRs that were still in the green among the top ten are Wave Life Sciences Ltd and Asian Pharma ADR. These ADRs offer American investors the opportunity to invest in Singaporean stocks and possibly profit from them.
American stock exchanges are definitely a competitive marketplace. The fact that stocks like Asian Pharma ADR are still garnering investor interest is a testament to the resilience of these stocks. At this juncture, even FAANG tech stocks have faced bumps recently despite the record levels the likes of Apple have been trading.
The Big Picture
The scale and reach of the Coronavirus outbreak are yet to become manifestly clear. Given initial optimism, it is now prudent to err of the side of caution with predictions. Accordingly, traders in stock markets across the world are reasonably worried about how the global economy will cope.
China is a vital component of global manufacturing and also a consumer market. The fact that Coronavirus could take a full percentage point off growth forecasts is serious. A ripple effect on other countries, especially those that trade heavily with China is a distinct possibility. Singapore has manageable Coronavirus cases but has to contend with proximity and indirect effects as well.
Therefore, some are taking a cautious approach and taking up defensive portfolios. In this scenario, an investor picks shares and securities that exhibit lower volatility and consistent returns. Such preparation and analysis are vital if you intend to have a decent turnover at the close of the year.
Covid-19 is a World Health Organization global emergency. As scary as it is, humanity has dealt with SARS and Ebola in the recent past. The resolve and expertise of the global scientific community will likely once again prove decisive in containing this outbreak. The panic that ensues following such an outbreak can dissipate quite fast with scientific breakthroughs in containment and possibly treatment of the virus.