STI - ENTERS IN BEAR TERRITORY

Primary trend of STI is confirmed to be Bearish as on 28^th September ‘15 STI broke its crucial support level of 2800 resulting in the total fall of around 730 points or 20% since mid of April. Technically, if the fall is more than 20% the market is said to be in bear phase. In the month of August market had seen the biggest fall since December 2008, with STI crashing around 420 points approx followed by fall of around 180 points in September,2015.

There are various factors which can be accounted for downfall of STI. To mention few:-

WEAK ECONOMIC DATA

Singapore hasn’t been performing well in past few months and weeks. Talking about the most recent event, air quality has degraded in Singapore due to haze from Indonesian forest fires which is driving the pollution gauge in parts of the country to hazardous levels and blanketing downtown Singapore with a layer of smog. This is having a negative impact on STI. The economic data from last 2 months is lower than expected. Here are the few highlights on the recent economic data of Singapore.

• Singapore's full-year 2015 GDP growth has been lowered to 2.2% from 2014's 2.9%.
• Manufacturing output declined by 7.0% in August 2015, on a year-on-year basis.
• Singapore's inflation fell 0.8% in August from a year earlier. Core inflation rate is estimated to be 0.5%-1.5%.
• Consumer confidence fell 0.9 point to 129.6 in September on heightened concerns about the economy in the next five years.
• Non-oil domestic exports declined 4.6% in Aug 2015, following a 0.7 per cent decline in the previous month, due to a contraction in both electronic and non-electronic NODX.
• Retail sales decreased 2.2% in July 2015 over the previous month.
• Import and Export Price Indices fell 2.5% and 1.2% respectively in July 2015 over June 2015 due mainly to lower oil prices.

Data source : http://www.singstat.gov.sg/

SLOWDOWN OF CHINA’S ECONOMY

China has sent ripples of shock waves across various markets throughout the world as China’s growth continues to slow down. Chinese shares have fallen about 38% since the peak in mid-June, despite the government’s efforts to support the indices by directly buying into the stock market a little short of two months ago.

Manufacturing slow down in China has impacted Singapore adversely. Also, there is a fear of a slowdown in Chinese growth and demand for raw materials, which if seen, will be another massive shock to the global economy.

STI has seen one of its major fall after China's central bank decided to devaluate their currency by dropping yuan to a four-year low. This led to fall in Singapore dollar to its 5-year low due to deprecation on Yuan.

FEAR OF U.S. RATE HIKE

With the various statements coming from Chairperson of FED, Janet Yellen, and FED officials, over the increased expectation of rate hike by end of 2015 has also created fear amongst the investors world wide. After seven years of a zero-interest-rate policy, the decision by Federal Reserve to increase U.S. Interest rate will lead to fall in Asian market as investors will start taking out their investment from Asian countries to invest in U.S. Market. The impact of this is felt on Singapore as the fear of rate hike is constantly dragging STI in red.

GLOBAL MELTDOWN

Talk about US, UK, European or Asian market, the global meltdown can be seen everywhere. Dow fell 469.68 points to 16,058.35, which is 12.3 percent below its record close of 18,312.39 set on May 19, 2015. Standard & Poor's 500 index slumped 58.33 points to 1,913.85. It's now down 10.2 percent from its high of 2,130.82 on May 21, 2015. Europe market also slashed down by around 16% since July. Talking about the Asian market, in last 2 months Shanghai and Nikkei has fallen by more than 20% , KLCI lost 8% and some other markets also showed the similar trends since then. Singapore in line with Asian and world market is suffering with the same sentiments.

 

STI has it’s support near 2700. Technically, STI is bearish as all indicators like RSI, MACD, CCI, etc are giving the indication of market to be bearish ahead. If STI breaks the level of 2700 it may come down to 2520. Investor sentiments are cautious over the early rate hike by FED and the slowdown of China’s economy.