Having a broad overview of the current economic conditions is essential for all investors looking to profit from the stock market as all stocks are subjected to market fluctuations and influences.

We will be examining the Singapore’s market conditions for November in this article, highlighting some of the booming sectors that have been pushing up the Straits Times Index (STI).

1. Rising oil prices boosting Oil & Gas sector

The oil and gas (O&G) sector has been the leading performer with rallies in stock price led by the large-cap stocks like Keppel Corp, SembCorp Marine, and SembCorp industry.

Oil prices have been steadily rising since August as the market watches for OPEC’s next move in their out coming meeting on 30 November.

OPEC, Russia, and nine other producers have already been cutting down production levels by about 1.8 million barrels per day since the start of this year in a bid to push up oil prices.

Analysts expectations that the reduction in output will be extended in the upcoming meeting is further driving up the prices.

This is especially so since the Saudi Crown Prince has said that the kingdom supports the extension of the output reduction.

Though rising oil prices may not bode well for some of us, the firms in the O&G sector are certainly benefiting from the latest development.

Analysts at DBS Research are expecting SembCorp Marine and SembCorp Industries to reap the benefits of the improving oil prices.

DBS Research’s eyes are also on PACC Offshore Services Holdings (POSH), another firm that is poised to benefit in the O&G sector.

With no bonds outstanding, and mostly owned by its parent company Kuok (Singapore) Ltd (82%), it is a potential privatisation candidate.

2. Rising interest rates

Investors are also closely monitoring the actions of the Federal Reserves in America.

As Trump picked Jerome Powell as the next Fed Chair, interest rates are likely to continue to increase at a modest pace as he has been supportive of Janet Yellen’s position of raising interest rates and lowering the Fed’s balance sheet gradually.

DBS Research analysts are predicting a rate hike in December that will see Fed funds rate rising to 1.5% by the end of the year with three more rates hikes in 2018, and potentially another two more in 2019.

As the world’s economy continues to grow and gain momentum, the rise in interest rates is not unexpected.

Singaporeans should expect to see changes in the US interest rates affecting us too since MAS has stated that Singapore’s interest rate is mostly “determined by foreign interest rates”.

3. Singapore’s economy is recovering

Overall, Singapore’s economy seems to be recovering and is currently transiting from the early- to mid-expansion phase where recovery is expanding to more sectors including electronics, marine/offshore engineering, and the construction sectors.

DBS Research’s year-end expectation of the STI was met last week when STI touched 3,395.

The current rally in the STI is expected to slow down as the year-end holiday period kicks in, but recovery in Singapore is certainly broadening into more sectors.

The recent rise in the index is mostly pushed by stocks in the shipyards sector (Keppel Corp, SembCorp Marine, SembCorp Industries), construction sector (Yong Nam), and crane companies (Sin Heng Heavy Machinery) rising to their 52-week high.

Interest in these sectors is expected to continue, hence, sustaining stock prices.

For those favouring technical analysis, DBS Research analysts found technical support at 3,325, and if it should fall below that, the next support level is at 3,280.

However, the likelihood of the STI falling to that extent is low except if an external shock event should occur.

For the STI to go beyond 3400, a clear net upward revision for the stocks in the STI is necessary.

Unless, of course, the market is willing to value the index at a higher price to earnings ratio of 14.8 times, as compared to its current 14.4 times.