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STI Falls Back Down To Earth After Holiday Rally
2013 ended with the Straits Times Index stuck at levels where it begun 2013 with. While the full year has been topsy turvy, investors might be more heartened to look to 2014 with more optimism.
However, if the first days of 2014 are anything to go by, we might just be stuck in a quagmire of ups and downs, particularly in emerging markets. Singapore’s GDP slowed while China’s manufacturing gauge fell.
Top gainers for the week included Oxley Holdings (+7 percent) after announced the ex-date (8 January 2014) of its $0.03 dividend. Other big gainers were Silverlake Axis (+6 percent) and United Envirotech (+6 percent).
Read on to find out what happened over the week!
Source: FactSet Research Systems
In Singapore…
1. Singapore Bank Lending Continues to Gain Steam
There is a lot of optimism that Singapore’s economic growth will pick up momentum in 2014. So far, rising levels of bank lending are supporting such an optimistic outlook. Lending increased in November, driven by business loans and increased consumer borrowing.
Lending rose to $565.8 billion, up 2.1 percent from October. Year-over-year, total bank lending grew by a healthy 17.4 percent. This suggests that both consumers and businesses are becoming increasingly confident about the prospects of the economy.
2. Singapore Home Prices Decline for First Time in Seven Quarters / Singapore Straits Time Index Starts Year On a High Note
For the first time in almost two years, Singapore’s home prices slid in 4Q13. This decline will result in the housing market posting its lowest gains since 2008. The private residential property index fell 0.8 percent during 4Q13 to 214.5 points, following a 0.4% gain in 3Q13.
While this might concern developers, cooling housing prices suggest that the government’s efforts to cool Asia’s second most expensive housing market are paying off. Rising living costs had emerged as one of the key issues for the government to address.
After closing out the year on a high note, Singapore’s Straits Times Index opened 2014 with a 7 point gain, good for 0.23 percent. There is plenty of optimism that as global markets recover, Singapore’s economy can continue to build momentum.
Perhaps more importantly, a 0.45 percent surge to close out 2013 means that the Straits Times’ gained 0.01 percent through the year. While such a gain may not seem like much, it’s important to remember that global conditions have remained largely turbulent and underwhelming throughout the year.
3. Economic Growth Slows to 4.4% in 4th Quarter
Singapore’s economy was far from sinking into recession in 2013, but growth did slow in the fourth quarter amid slack demand for both manufactured goods and services. 4Q13 growth slowed to 4.4 percent from 5.9 percent in 3Q13.
Growth also failed to meet a Reuters’ poll projection, which predicted growth of 4.7 percent.
Growth in the manufacturing sector declined from 5.3 percent to 3.5 percent. The services sector suffered a less pronounced decline from 6.5 percent to 5.5 percent. With these estimates calculated in, Singapore’s economy grew by 3.7 percent in 2013.
Around the World…
4. Local Debt Levels Hit 3 Trillion in China
During the global slowdown following the 2008 Financial Crisis, the Chinese national government encouraged local governments to launch stimulus measures to support economic growth. This kicked off a period of borrowing by local governments. Now, local debt levels have risen to nearly $3 trillion.
Since 2010, local government debt has continued to climb at approximately 20 percent year-on-year, despite a stabilizing global economy. While analysts do not believe that these debt levels represent an immediate threat, there are concerns that China’s fiscal situation could continue to deteriorate.
5. U.S. Stocks End Year on High Note but Open With Decline
American stocks are now hovering near record highs, so it should come as no surprise that investors have cheered a year that saw strong gains.
Posting the best gains since the roaring 1990′s, the S&P 500 recorded 29.6 percent growth through the year. Stocks were spurred forward by a strengthening economy and Federal stimulus measures.
Despite the rosy outlook, some investors decided to cash in on their profits. This caused stock markets to open the year in the red. The S&P 500 lost 0.89 percent and the DJIA lost 0.82 percent. This represents the first negative New Year’s opening since 2008.
6. China’s PMI Officially Dips
Negative projections regarding China’s official PMI have been confirmed. December’s Purchasing Managers’ Index dropped to 51, down from 51.4 in November. While a reading of 51 still represents expansion, it also represents the first slowdown in expansion since June of 2013.
This number is also below expectations of 51.2, which would have represented a more moderate decline. All major PMI measures declined, suggesting downward pressure on the economy. Given that the yuan has risen 3 percent against the dollar, some are suggesting that a strengthening currency has hurt exports.
Meanwhile, a HSBC/Markit reading of China’s PMI also saw a fall to 50.5 from 50.8 in November. HSBC’s reading of the PMI is different from the official reading because HSBC’s methodology includes a survey of smaller manufacturers while the official reading focuses more on larger and state manufacturers.
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