OFFICIALDOM of various sorts played central roles this week, starting with the International Monetary Fund (IMF) on Monday and ending with the European Central Bank (ECB) on Thursday.However, contrary to expectations, the impact they made was the exact opposite of what markets had anticipated - the IMF's endorsement of China's yuan as a reserve currency pushed stocks up instead of down as yuan devaluation fears were defused by assurances from China's central bank, whilst the ECB disappointed markets with its stimulus package because markets had expected more.
If the steep drop suffered by Western markets on Thursday after the ECB meeting teaches us anything, it's that markets appear to be still operating on "bad news is good for stocks", ie they are highly dependent on money handouts to keep rising.
Here, the Straits Times Index managed three consecutive days of rises between Tuesday and Thursday which helped it record a 20-point or 0.7 per cent gain for the week at 2,879.05.
On Friday, the index first plunged in response to Thursday's losses in the West but clawed its way back in expectation of a Wall Street rebound, ending only a net 4.84 points weaker.
The big problem throughout this year has been liquidity and this week showed no signs of improvement. Other than a spike up on Monday when index stocks were likely window-dressed, daily turnover has hovered around the S$1 billion mark, in line with averages throughout 2015. On Friday, the week-low total of 1.2 billion units worth S$771.2 million was recorded.
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