Amazing 2 days of trading on Singapore Bourse, Thursday (19 Apr) and Friday (20 Apr)

On Thursday, the STI index shed 3.2%. This was due mainly to the news that China’s economy may be overheating and China may raise interest rate to rein in on the economy. China said that its economy grew 11.1% in the first quarter, compared with a 10.4% annual rise in the fourth quarter of 2006. The March Consumer Price Index also rose at a higher-than-expected 3.3% year on year, versus a forecast of 2.8%. (The Business Times, 20 Apr) The Asian economies are so intertwined with the China economy that the Singapore stock market moved in tandem with the Chinese stock market.

However, the US stock markets which trade after us (due to time zone difference) struck off this blip in the Asian markets on Thursday due to their positive corporate results and economic outlook in the US. On Friday, the STI rebounded 2.1% on a huge volume of 4.1 billion shares traded worth S$1.9 billion. (The Straits Times, 21 Apr). This was a quick reversal from Thursday.

On Wednesday (18 Apr), the benchmark three-month Singapore interbank offered rate (Sibor) fell to 2.56%, the lowest since October 2005. (The Business Times, 21 Apr) This seems to suggest that there is too much liquidity in the Singapore market and with so much money; the investors are finding ways to invest these money. Naturally, they are looking at the stock market for higher returns on their excess funds than parking their funds in low yield financial instruments (low interest rate).

What will STI be like coming Monday and for the week? It is unpredictable. If you are conservative, just watch the stock markets on the sideline and perhaps go for some financial assets that are predictable and more stable. Returns may not be spectacular but you can rest easy.

Written on 4/22/2007 5:19 PM

Copyright © 2007, the author known as LKT in Singapore.

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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