Oct 12, 2015

    Traders await China, S'pore economic data

    LOCAL investors are expected to watch for key economic data from China and Singapore this week as well as decide whether oil prices can maintain their upward momentum on a weaker United States dollar as Russia continues its military operations in Syria.

    The benchmark Straits Times Index (STI) rallied 7.4 per cent last week, closing at 2,998.5 on Friday, following signals from minutes of the latest Federal Reserve policy meeting last month that an interest rate hike isn't likely this year.

    The stock market also rallied on positive sentiment over the conclusion of a historic trade accord and a rise in oil prices.

    Singapore shares may take a breather this week on the heels of such a strong performance, analysts say.

    Said remisier Alvin Yong said: "If oil prices continue to rally on Middle East tensions, that should be positive for oil-related stocks, including Keppel Corp and SembMarine, which could support the STI."

    China's exports, imports and trade balance data for last month, to be released tomorrow, will likely give investors clues on the strength of the Chinese economy. "The wild card this week is whether the Chinese government will announce more stimulus measures to support the economy," Mr Yong said.

    In Singapore, the central bank's closely watched semi-annual monetary policy decision and advance estimates of Singapore's third-quarter economic growth will be released on Wednesday.

    Analysts are expecting the Monetary Authority of Singapore (MAS) to ease monetary policy - in effect weakening the Singapore dollar - due to the rising risk of a technical recession and downside risks to the inflation outlook. Financial conditions have tightened in recent months, and this is pointing towards further slowing in growth.

    "Since 1999, there have only been three occasions when the MAS re-centred the policy band lower. The common thread during those periods were that the S$NEER was trading close to or at the lower bound, policy was at neutral, and there was some form of negative external shock," ANZ senior FX strategist Khoon Goh said.

    He was referring to the Singapore dollar nominal effective exchange rate, which takes into account the value of currencies of Singapore's major trading partners.

    Current concerns around emerging markets and volatility ahead of the possible interest rate increase by year end could count as a negative external shock, he said.

    "We believe a re-centring of the policy band towards the prevailing S$NEER level is needed to take pressure off domestic interest rates."

    However, it is also possible that MAS could leave the policy unchanged, preferring to wait until after the US Federal Reserve moves on rates before deciding, he added.