Calm descends on quarter-end and month-end

Although sentiments seem calmer on the last day for September and Q3, Asian investors are unlikely to take much comfort in the weak performance on Wall Street.

Standard & Poor building
Source: Bloomberg

S&P 500 managed to eke out a +0.1% gain but intraday trade showed that strong selling interests are sitting on the 1900 handle, where an early attempt to test the level was quickly driven back. It was also telling that the Dow swung on either side of the 16,000 level before closing higher by +0.3%. Of course, risk aversion is slightly dialled lower, looking at a lower VIX index at 26.8 on Tuesday, compared to 27.6 in the previous day.

The stock in which was blamed for yesterday’s commodity selloff, Glencore, recouped part of its Monday’s 29% plunge, rebounding 17%. The share however is still down over 70% of its value at the end of 2014, underscoring the gloomy outlook for the commodity complex.

We could see some steady trade in the Asian equity markets today, but judging from the overnight leads, a full risk-on mode is very unlikely. Furthermore, most Asian bourses are expected to cap off September with another month of losses. The Shanghai Composite Index has chalked up three months of losses since June. The index is down 5.7% as of 29 September.

The Nikkei is likely to post its second straight month of losses. The STI is one of the weakest indices around, looking set to continue its monthly losses for the fifth consecutive time. From the over seven-year highs of 3544 in April, the index has gave up over 20% through five months, which led it to be lower by more than 17% on a year-to-date basis.

Following the recovery in Glencore prices, we may see a similar rebound in local commodity-related counters. Yesterday, the initial fall in stocks such as Wilmar and Noble were deeper but share prices managed to trim some of those losses in the late afternoon.

Wilmar dropped 3.1% to end at an almost seven-year low of SGD 2.52 while Noble tumbled 10.1% to close at a key support at SGD0.40. Bloomberg noted that Noble Agri, an associate firm of Noble Group has increased its revolving lines of credit by SGD 50 million to SGD 1.58 billion, as two new lenders joined the revolver.


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