SINGAPORE (April 10): DBS is hoping that last week’s US missile attack on Syria is a one-off. Whatever the case, the latest spike in geopolitical uncertainty has given investors a “good excuse” to go “risk-off” while safe haven assets rebounded.
Last Friday, the US launched a missile attack against Syria in response to Assad’s use of poison gas against his own civilians. The worry is that the situation could escalate. Russia’s deputy UN ambassador said, before the strikes were made public, that any US military action would have “negative consequences”.
Equities reacted down, and oil price rose on this latest Middle East development, while gold and bonds rebounded from the flight to safety. Initial reactions from countries do not suggest an escalation of uncertainty and financial markets’ initial knee-jerk reaction to the missile strike had eased by last Friday’s end.
“We keep our fingers cross that investors can put this event aside soon enough and focus on the other key events happening the rest of the month,” says DBS in a note published today.
These include MAS policy meeting on 13 April, the French presidential elections on April 23, as well as the 1Q17 results season.
In the “risk-off” mode, DBS says defensive stocks such as Sheng Siong and Thai Beverage may outperform. ST Engineering may benefit through its defence arm while CNMC Goldmine from higher gold prices.
On the other hand, S-REITs may benefit from slower US rate hike expectations. Transport stocks that are sensitive to oil price fluctuations may underperform as would banks UOB, OCBC on a slower rise in Net Interest Margins, as the pace of US rate hikes may ease.
