Broker's take: Paris attacks to reinforce predisposition towards lower global stock prices, says DBS

By

Claire Huanghuangjy@sph.com.sg@ClaireHuangBT

Lim Say Boon is the Chief Investment Officer for DBS, Group Wealth Management and Private Banking. 

PHOTO: BUSINESS TIMES FILE

NOV 16, 201511:24 AM

THE Paris attacks, as appalling and as tragic as they were, are unlikely to have a lasting impact on the markets, wrote Lim Say Boon, chief investment officer at DBS Bank in DBS Asian Insights.

Global equities were already correcting before the terrible events of Friday night, he said, adding that previously, the local lender had said global equities would likely trade weaker into December as markets digested the growing probability of a US Federal Reserve rate hike amid a slowing global economy, and the beginnings of earnings contraction in the US.

Last week, the local lender also warned that the Chinese equities rally was running out of steam as incoming economic data remained weak.

"What the Paris events will do is reinforce the predisposition towards lower stock prices throughout the world. Beyond that, there will be rebounds, probably late this year or early next year. But the primary trend in global equities is sideways to weak. Meaning, the rebounds that will likely come after the year-end correction will be counter-trend rallies - bounces within a downtrend channel," said Mr Lim.

The fundamentals underlying the weakening trend will likely be a slowing global economic growth amid rising rates in the US; market fear that economies are not responding sustainably to further monetary stimulus; "full" equities valuations in developed markets; contracting earnings in the US; and continuation of earnings recessions in the emerging markets, he said.

    
 

Asia: Markets down after Paris attacks, Japan in recession

PHOTO: EPA

NOV 16, 201511:08 AM

[Hong Kong] Asian stock markets tumbled and the euro lost ground early Monday in the first trades after the deadly weekend terror attacks in Paris.

The late-night assault on Friday in French capital, which killed 129 people, sparked concerns about security in Europe and its impact on the already struggling eurozone economy.

It also sowed fresh uncertainty in already nervous markets, which ended last week on a low owing to increasing worries about the state of the global economy.

Losses across Asian stock markets were joined by a fall in the euro, which is already under pressure from expectations the European Central Bank will loosen monetary policy to shore up the eurozone.

"There is no doubt that the attacks in Paris will contribute to short-term investor nervousness," Shane Oliver, Sydney-based strategist at AMP Capital Investors, said.

However, he added that he expected the Paris-linked losses to be brief and pointed out that markets had bounced back from initial selling following past terror attacks.

"I think history will repeat itself. It will just be a short selloff in response to the Paris attacks," he told Bloomberg News.

In early trade, Hong Kong was 1.2 per cent off, Tokyo fell one per cent and Sydney gave up 0.9 per cent.

Adding to selling pressure in Tokyo on Monday was data showing the Japanese economy had slipped into recession for the second time in three years, throwing into question the government's much-vaunted drive to kickstart growth and inflation.

The Cabinet Office said gross domestic product (GDP) shrank 0.2 per cent in July-September, or 0.8 per cent on an annualised basis, marking the second straight quarterly decline - a technical recession.

The preliminary figure was worse than the 0.1 per cent decline forecast in a Bloomberg News survey and will put pressure on the Bank of Japan to ramp up its bond-buying scheme of monetary easing. The central bank is scheduled to hold a policy meeting this week.

The soft results continue to flow despite Prime Minister Shinzo Abe's big-spending three-year plan - dubbed "Abenomics" - to revitalise the torpid economy and end years of debilitating deflation.

Taro Saito, director of economic research at NLI Research Institute, told AFP: "Companies are reluctant to invest despite their sound profits." He added that while consumer spending improved "its overall trend still remains weak".

In China, authorities doubled the deposit required for investors to borrow funds to trade stocks - known as margin trading - as they try to limit a practice that led a massive market bubble and summer rout.

The minimum requirement for margin trading was hiked to 100 per cent from 50 per cent, meaning traders must have the same level of funds in their accounts as the amount they want to borrow.

Margin trading was behind a stock market rally that sent the Shanghai index up 150 per cent in a year, before it crashed in June.

The move comes as Shanghai rebounds from the summer volatility, with the benchmark index now up 22 per cent from its August low. However, on Monday it was off 0.6 per cent.

AFP

    
 

Asian airlines fall on fear Paris attacks will curb tourism

A China Eastern Airlines Corp. airplane is parked on the tarmac at Hongqiao International Airport in Shanghai, China, on Saturday, May 12, 2012. 

PHOTO: BLOOMBERG

NOV 16, 201510:44 AM

[HONG KONG] Shares of airline operators across Asia tumbled on worries that the deadly terrorist attacks in Paris will deter tourists from traveling to the French capital.

Eva Airways Corp of Taiwan was down 7.8 per cent at TW$17.05 as of 9.51am local time, while China Southern Airlines Co dropped 4.8 per cent in Hong Kong to HK$5.78. China Eastern Airlines Corp and Hainan Airlines Co fell a much as 4.7 per cent and 3.1 per cent, respectively, while Cathay Pacific Airways Ltd was down 2 per cent.

"There will definitely be a negative psychological impact in the short term in tourism-related sectors. Airlines are particularly affected," said Zhang Qi, a Shanghai-based analyst with Haitong Securities Co. The situation in France is "still quite uncertain now, so investors seem to be broadly risk-off today."

The negative impact on China-to-France tourism will last as long as a year, with many tourists likely to cancel or change trips to France and Europe generally, China International Capital Corp Ltd said in a note.

Hana Tour Service Inc, South Korea's biggest travel agent, said it has been receiving plenty of inquiries from customers but didn't see cancellations over the weekend.

Some clients have had to change their itineraries in Paris as museums and other tourist attractions have either been closed or had limited access, the agency said.

BLOOMBERG

    
 

Oil prices up on geopolitical tensions sparked by Paris attacks

Oil prices climbed in Asia on Monday on geopolitical tensions sparked by the deadly terror attacks in Paris but analysts said a global crude supply glut is likely to restrict any gains. 

PHOTO: BLOOMBERG

NOV 16, 201511:27 AM

[SINGAPORE] Oil prices climbed in Asia on Monday on geopolitical tensions sparked by the deadly terror attacks in Paris but analysts said a global crude supply glut is likely to restrict any gains.

French warplanes pounded the Islamic State group's de facto capital in Syria on Sunday in retaliation for the carnage in the French capital claimed by the jihadists, sparking fears of escalating tensions in the oil-producing but politically volatile Middle East.

At around 0245 GMT, US benchmark West Texas Intermediate for delivery in December was up 27 cents to US$41.01 and Brent crude for January - a new contract - was trading 50 cents higher at US$44.97 a barrel.

"With France starting to increase its (military) efforts in the affected region, prices for the rest of the week may have some upper push," said Daniel Ang, an investment with Phillip Futures in Singapore.

He said however that "prices may not rise as much" because of the crude oversupply.

"Price increases fuelled by geopolitical tensions will only be for the short term. For the longer term, the main driver for prices will be global supply and demand, and with the glut it would be a bit more difficult for prices to move up a lot further," he told AFP.

Mr Ang said Monday's uptick was helped by bargain-hunting after prices dropped to two-month lows Friday following data showing commercial crude stockpiles in developed nations had risen to a record high.

But a strong dollar was also tempering enthusiasm.

Oil is traded in the US currency and a strong dollar would make the commodity more expensive to holders of weaker units, hurting demand.

Oil prices have plunged by more than half since reaching peaks of above US$100 a barrel in mid-2014 owing to the supply glut, near record output levels and a slowdown in the global economy, particularly major energy user China.

AFP

    
 

Demand for risk and compliance specialists to remain high in 2016: Randstad

By

Angela Tanangelat@sph.com.sg

Risk and compliance specialists are expected to enjoy a greater increase in average salary compared to their general banking colleagues, according to recruitment firm Randstad. 

PHOTO: REUTERS

NOV 16, 201511:29 AM

RISK and compliance specialists are expected to enjoy a greater increase in average salary compared to their general banking colleagues, according to recruitment firm Randstad.

According to its associate director for banking and financial services, Lim Chaileng, demand for risk and compliance experts will remain high next year despite job cuts at global banks. This is because of the growing complexity of Singapore's regulatory environment.

Over the past year, the recruitment agency has seen a 20 per cent increase in the demand for risk and compliance experts. Banks in Singapore have doubled the size of their compliance teams to service the new regulatory environment. They have been recruiting specialists focused on regulation, policy development and assessing and mitigating risk.

"As Singapore takes steps to create a Smart Financial Centre, there will be a raft of new initiatives resulting in increased regulation. At the same time, increased competition is leading to greater consolidation in banking operations and potentially more mergers and acquisitions, so the demand for these professionals is expected to soar,'' Ms Lim explained.

Across the board, banking and finance industry professionals can expect to see a salary increase of 3 to 5 per cent next year, with the average bonus in the vicinity of two to three months' salary, according to Randstad.

"The operations function, including know your customer (KYC) and on-boarding roles, will see the greatest demand for fresh graduates, while sales relationship managers will be future-proofed in the years to come with the need for customer interface unlikely to disappear any time soon," said Ms Lim.

However, the news is not so good for back office settlements roles, as these jobs are increasingly offshored to countries such as India, the Philippines and Malaysia, or outsourced to a third party.

Technology will continue to play a large role in the changing face of the banking and finance industry in the coming years.

"Traditional banking products and solutions are on the way out, so banks are now looking for digitally savvy candidates with exposure to innovative banking solutions,'' Ms Lim said.

"We expect that over the next one to five years we will see a growing demand for sales people who are comfortable with interacting with clients on digital platforms, risk managers to assess and mitigate risk across technology platforms and innovation drivers to help banks get ahead of the competition," she added.

    
 

Euro sinks as safe havens rally after Paris attacks

The euro fell against its major peers in Asia Monday as dealers shifted back to safer investments after the deadly weekend terror attacks in Paris reinforced concerns about the impact on the already struggling eurozone economy. 

PHOTO: BLOOMBERG

NOV 16, 20151:44 PM

[TOKYO] The euro fell against its major peers in Asia Monday as dealers shifted back to safer investments after the deadly weekend terror attacks in Paris reinforced concerns about the impact on the already struggling eurozone economy.

The risk-off mood, also stoked by fresh data showing that Japan's economy slipped back into recession in the third quarter, weighed especially on the euro as foreign exchange markets opened for the first time since the attacks that killed at least 129 people.

The impact of the violence on the eurozone fuelled a fall in the single currency, which is already under pressure from expectations the European Central Bank will ramp up its stimulus programme to boost growth.

The euro slipped to US$1.0720 and 131.31 yen from US$1.0764 and 131.99 yen Friday in New York.

The dollar dropped to 122.50 yen from 122.62 yen in US trade.

"The euro is under pressure as markets see recent events as destabilising, and increase the uncertainty over the European economic outlook," Sam Tuck, a senior currency strategist at ANZ Bank New Zealand Ltd, told Bloomberg News.

"The yen is currently benefiting from its traditional 'safe haven' status." Dealers move into assets seen as less risky like the yen in times of uncertainty and turmoil.

Japan's economy, the world's number three in size, shrank 0.2 per cent in the July-September quarter, official data showed Monday, marking a second straight quarterly decline, or technical recession.

The dollar rallied against higher-yielding, or riskier, emerging units such as the South Korean won and the Indonesian rupiah.

The won fell 0.78 per cent against the greenback, while the rupiah was down 0.44 per cent and the Malaysian ringgit shed 0.34 per cent. The Thai baht and the Singapore dollar also dropped.

AFP

    
 

Regional tensions, Paris attacks hang over APEC summit

Members of the police Special Action Force (SAF) walk in front of signage for the Asia-Pacific Economic Cooperation (APEC) summit after a drill simulating a Paris-like attack at the convention center, the venue of the summit in Manila on Nov 14, 2015. 

PHOTO: AFP

NOV 16, 201512:23 PM

[MANILA] Regional tensions over the South China Sea and security concerns after the attack by Islamist militants on Paris could eclipse efforts by Pacific-rim leaders this week to boost trade and growth across a region of around 3 billion people.

Market uncertainty, protectionist pressures and the need for difficult reform as trade growth slows will nevertheless be on the minds of close to 20 leaders attending the Asia-Pacific Economic Cooperation (APEC) in Manila.

The Philippines went on high alert following the strike on France's capital, ramping up security in Manila to ensure the safety of thousands of delegates. Traffic snarled across the city of 12 million on Monday as police closed off many roads leading to meeting venues where ministers held preparatory talks ahead of the Nov 18-19 summit.

Philippines officials say there has been no intelligence suggesting there might be an attack on the Manila summit, which will be attended by US President Barack Obama, Chinese President Xi Jinping and Japanese Prime Minister Shinzo Abe, but about 30,000 police and soldiers have been deployed to guard it. "There are no credible threats, I can assure you that," said national police spokesman Wilben Mayor. "But, in general, we have intensified intelligence operations and beefed up security." Obama and other world leaders are to arrive in Manila from Tuesday, many after attending the G20 leaders summit in Turkey, where the Paris attacks overshadowed the agenda. "Traditionally the G20 has been a forum primarily to discuss economic issues facing the globe ... (but) the sky has been darkened by the horrific attacks that took place in Paris,"Obama said in a statement on Sunday.

Even before Friday's assault by gunmen and bombers that left at least 129 dead in Paris, there had been concern that APEC's agenda of enhancing economic integration would be undermined by other issues, not least feuding over the South China Sea.

The Philippines has vowed to be a "good host" by keeping off the summit agenda a subject that has whipped up tension between China and the United States in recent weeks, but said it could come up at a concluding retreat of leaders on Thursday. "We have no control over what the other economic leaders would be raising during the leaders' retreat," foreign affairs spokesman Charles Jose said on Friday, relaying a message that the Philippines' foreign minister gave to his Chinese counterpart at a meeting last week. "What is happening now in the South China Sea is causing instability and undermining peace and stability that could have an impact on the development and economic prosperity of the countries in the region," he added.

Beijing, which claims almost the entire energy-rich South China Sea through which US$5 trillion in ship-borne trade passes yearly, has stepped up land reclamation and construction in disputed islands and reefs there. Vietnam, the Philippines, Taiwan, Malaysia and Brunei also claim parts of the waterway.

A week before the summit, US B-52 strategic bombers flew near Chinese artificial islands, signalling Washington's determination to challenge Beijing over the disputed sea.

Obama will likely discuss the friction over the South China Sea and military relations when he meets with Philippine President Benigno Aquino on the sidelines of the summit, said Philip Goldberg, US ambassador to the Philippines.

Aquino and Japan's Abe are also expected to agree on a deal paving the way for Tokyo to supply Manila with used military equipment, possibly including aircraft that could be deployed to patrol the disputed South China Sea, sources said. The deal will mark the first time Japan has agreed to directly donate military equipment to another country.

Manila and Hanoi are due to sign a strategic partnership deal governing how their navies will work together.

Such developments could upset China, which said last week it was up to Manila to repair damaged bilateral ties. Beijing has insisted on using a bilateral track to resolve the dispute.

The APEC meeting will be the first for newly elected Canadian Prime Minister Justin Trudeau. But the leaders of two other G20 countries, Russia's Vladimir Putin and Indonesia's Joko Widodo, are not attending, both citing domestic issues for staying away.

It will be a chance for leaders of the 12-member Trans-Pacific Partnership (TPP) to meet for the first time since they sealed a deal to eliminate trade barriers and enable free trade.

APEC, which accounts for 60 per cent of global output and nearly half of world trade, is aiming for a larger free-trade area for its 21 economies by 2025, but a re-emergence in some states of protectionism as growth stutters could be a hindrance. "A slowdown in trade growth is weighing on Asia-Pacific economies, coming after a quarter century of high trade growth that fuelled the region's development and transformed it into an engine for the global economy," the APEC Secretariat said in a statement on Sunday.

REUTERS

    
 

Paris attacks intensify migrant debate in EU

A photo taken in Belgrade on Nov 15, 2015 shows the frontpage of Serbian magazine Blic, displaying a Syrian passport found by police at the scene of one of the Paris attacks. 

PHOTO: AFP

NOV 16, 201512:11 PM

[VIENNA] The Paris attacks and the discovery of a Syrian passport near one of the assailant's bodies have revived the European debate on whether to take a harder line on migrants.

With the continent facing its biggest migration crisis since World War II, EU states have bickered for months on how to stem the flow and share out the new arrivals.

There have been steady calls from the right - and more emerged Sunday - for nations to be wary of the wave of people fleeing war and poverty in Africa and the Middle East.

"Not every refugee is an Islamic State terrorist. But to believe that there is not a single fighter among the refugees is naive," Markus Soeder, a politician with the conservative Bavarian party CSU told the German press on Sunday.

"Paris changed everything" and "this is no time for uncontrolled immigration," said Mr Soeder, whose party has been critical of German Chancellor Angela Merkel's accommodating stance on refugees.

Yet on Sunday, European Commission President Jean-Claude Juncker defended the line that "there is no need for an overall review of the European policy on refugees."

The men made their comments days after a team of assailants launched coordinated attacks, claimed by the Islamic State group, in the French capital that killed at least 129 people.

The discovery of a Syrian passport near the body of one attacker has raised fears that some of the assailants might have entered Europe as part of the huge influx of people fleeing Syria's civil war.

Greek and Serbian authorities have confirmed the passport belonged to a man who registered as a refugee in October on the island of Leros and applied for asylum in Serbia a few days later.

Poland's incoming European Affairs Minister Konrad Szymanski said on Saturday that Warsaw no longer considered an EU plan to redistribute refugees across Europe as a "political possibility" in light of the Paris attacks.

Dutch anti-immigration politician Geert Wilders weighed in on Twitter on Sunday, writing "(Prime Minister Mark) Rutte will you listen at last: Close the borders!"

PEGIDA, the German Islamophobic movement, has predicted that attacks in Germany are inescapable "if we don't stop the avalanche of asylum seekers, if we do not properly secure our borders." More than 800,000 migrants have arrived in Europe by sea so far this year, mostly from the Middle East, with Germany alone expecting nearly a million migrants in 2015.

Other voices have called for calmer thinking. Germany's Interior Minister Thomas de Maiziere, has warned against any "swift links" between the Paris attacks and Europe's migrant crisis.

"Those who organised, who perpetrated the attacks are the very same people who the refugees are fleeing and not the opposite," said Mr Juncker.

"Those behind the attacks in Paris cannot be put on equal footing with refugees who are seeking asylum," he said.

A source inside Mr Juncker's entourage noted that his words do not mean there is flexibility to even partially review the 28-nation bloc's stance on refugees.

The Netherlands' Foreign Affairs Minister Bert Koenders noted that "closing the borders creates the illusion that we are safe. It's a fairy tale that does not help anyone." "We must not be naive. We have to check migrants so that we know who we are dealing with, but we need to be very careful when linking causes and effects," he added.

"I understand this fear, and we cannot completely rule out" the presence of jihadists among the migrants, but "we are dealing with terrorism that took place both before and after the wave of migration," Mr Koenders said.

In Croatia, which has become the main Balkan country of transit for migrants, Prime Minister Zoran Milanovic reminded that "closing (borders) and barbed wire does not prevent these kind of tragedies."

AFP