We are seeing the end of 2019 in a few weeks time. What is the likelihood of the Straits Times Index (STI) falling below last year’s? 2018 STI ended at 3,068.76 points. Currently, the STI is at 3,176.75 points at 1.34 pm 5 December 2019.
The Global Financial Crisis (GFC) started in late 2007 when the world did not realise how bad the GFC would be until 2008/2009. The STI in 2007 was 3,482 points. It collapsed in 2008 to 1,761 points. The table below shows Singapore’s Real GDP Growth Rates for the years and the corresponding STI.
|Year||Real GDP %||STI||Remarks|
|2008||1.8||1,761||Global Financial Crisis|
|2009||0.1||2,897||Global Financial Crisis|
|2011||6.1||2,646||Eurozone debt crisis|
|2013||3.9||3,167.43||Fed Taper tantrum|
|2015||2.9||2,882.73||China slowdown. Oil dropped to below US$30|
|2016||3.0||2,880.76||Brexit, Donald Trump won Presidential election.|
|2018||3.1||3,068.76||US Trade war with nations|
|2019||0.5 to 1.0 F||??||US-China trade war|
2017 was a good year for Singapore when her GDP growth rate was 3.7% and the STI ended a high 3.402.92 points. In 2018, the GDP growth rate came down to 3.1% and the STI was down as well to 3.068.76 points.
For this year (2019), the Ministry of Trade and Industry (MTI) forecast the GDP growth rate to be between 0.5% to 1.0%. This is significantly lower than the year before. The STI is now sentiment-driven with the US-China trade war blowing hot and cold on the financial markets. I think, we would be lucky if the STI stays above last year’s ending number (3,068.76). The next flash point is 15 December. Would US slap more tariffs on China exports to the US from 15 December? Would there be a truce on the trade war front?
Based on economic fundamentals and global expansionary monetary policies, we might see the STI hovering above 3,068 points (subject to positive outcome of US-China trade negotiation).
I stand to be corrected.
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