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Dr Chan: Caution; US Rate Hike Will Hit Singapore Market Harder
Aspire, Thought Leaders | 14 December 2015
By: Dr Chan Yan Chong
Articles (200) Profile

The Straits Times Index rebound in October, then down again in December, trending much differently from that of the US. Notwithstanding the likelihood of interest rate hike, prices of the US corporate stocks (besides oil and energy stocks) are on the whole performing well. Raising interest rate may not affect the US stocks much, but it will hit Singapore stock market harder. The rise in the US interest rate will lead to outflows of hot monies from Singapore to the US, hurting the Singapore stock market.

Decline of Foreign Labour Might be Reason of Economic Slowdown

Singapore’s real economy is having some problems, as economic data indicate that the Singapore economy is slowing down. Singapore Government top officials have started discussing foreign labour and population ageing issues. We all know the number of votes gained by The People’s Action Party in the 2011 election was at historic low, and the PAP’s subsequent analysis of the election results concluded that Singaporeans were not in favour of too many immigrants and foreign workers coming to the country. Thus, for the past few years and the current election year, in particular, the number of foreign workers and new immigrants has drastically fallen. One of the reasons the economy slows down is due to a shortage of foreign workers, giving rise to higher corporate operating costs and lower profits. Fewer new immigrants also affect the rental income of those renting out their apartments or rooms. With the exception of the US, the international economic recession also leads to making other regional stock markets vulnerable.

Grim Outlook of Shipping Industries

The only stock rising against the market’s declining trend is Neptune Orient Lines (NOL). Temasek has concluded the sale of NOL to France’s shipping giant CMA CGM for $1.30 a share. The price is at its highest in the past 3 years, though far from the $6.10 peak in 2007. The fact that Temasek did not sell NOL in 2007, but has to unload at current low price level gives us a hint of the grim outlook of shipping industries. NOL is currently incurring losses, and Temasek’s sale of NOL is for stop-loss. The high likelihood of the US interest rate hike may not affect the US stocks, but will affect the local stocks. Therefore, it is better to be cautious and conservative.

Dr Chan Yan Chong is a renowned investment expert with many accolades under his belt.

Please click here for more information about this author.


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