The Hang Seng Index - which had underperformed the STI - due to domestic challenges such as a weak commercial property sector, has also broken out and its rally may have legs.
Local proxies include the Lion-OCBC Securities HS Tech ETF (HSTECH) and the Lion-OCBC Securitires China Leaders ETF. The latter is broad-based and is building a base.
HSTECH has broken out of a minor base formation accompanied by a significant expansion in volume, suggesting that it may be able to meet its immediate upside of around 63 cents.
See also: Straits Times Index shows signs of decoupling from the US by outperforming
Normalised yield curve
It was with relief that many market watchers saw the yield curve normalising in the past two weeks. An inverted yield curve, usually an ominous sign often depicts the likelihood of a recession.
See also: Bond market pushes back on Trump's tariffs
According to UOB Quarterly Global Outlook, the yield curve started normalising in August. The yield curve started to invert from July 2022 and has largely stayed inverted till data compiled from Bloomberg showed it had normalised on Sept 6.
“This normalisation of the yield curve can be simply explained by the quicker and larger drop in front end short-dated rates, which are more sensitive to market expectations of imminent Fed cutting cycle,” the UOB Quarterly Global Outlook report explains.
UOB expects the yield curve to steepen further although the steepening may be shallower than previous rounds, unless rate cuts accelerate if the jobs market weakens.
“A return to a positive yield curve should be a welcome relief as we are back to a “normal” yield curve regime whereby longer dated rates pay more due to higher risk,” UOB says, a sentiment echoed by many investors.
