The Straits Times Index (STI) rose for a second day to end at 2,849 points today, which was the last trading day before the Chinese New Year break. Since the start of this year, STI had increased 7.6 per cent. This was a good start for this year.
Looking back at some historical data of STI (in chronological order):
|1 Aug 2011||3,215|
|5 Aug 2011||2,994||Down|
|29 Sep 2011||2,708||Down|
|5 Oct 2011||2,528||Down|
|28 Oct 2011||2,905||Up|
|30 Dec 2011||2,646||Down|
|17 Jan 2012||2,815||Up|
|20 Jan 2012||2,849||Up|
Since STI hitting a high at 3,215 points on 1 August 2011, we had not seen STI came close to it. STI continued to decline and touched a new low at 2,528 points on 5 October 2011. Since November, STI was hovering between 2,600 to 2,800 points.
How will the stock market move for the rest this year?
For starter, look at the Gross Domestic Product (GDP) forecasts of world economy and Singapore economy. The most recent forecast of the world economy was from the World Bank. It forecast the world economy to grow at just 2.5 per cent this year and 3.1 per cent next year. In the case of Singapore, GDP is forecast to grow between 1.0 to 3.0 per cent this year. These are weaker than the performances for last year. If this the case, one cannot see how STI can go beyond 3,200 points, which was the best of last year.
I am aware that it is foolhardy to predict the STI. STI can move for many other reasons besides GDP, such as confidence level of investors; capital flow from overseas to local market due to loose monetary policy of these countries; unexpected geopolitical crisis that may arise in other nations; natural disasters of countries.
Copyright © 2012, limkimtong for Living Investment
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