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Straits Times 3,162.57 -20.57 -0.65%
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Dear Markets: Are You Ready For The QE Withdrawal?
By: Jade Lee
Articles (97) Profile

While most of the global indices seemed to enter a correction phase, a good-but-not-great May jobs data was strong enough to lift US market higher, but not so strong as to push the Fed towards a slowdown in easing. Specifically, the jump in jobs was not sufficient enough to cause a substantial jump in income levels, signifying retail sales growth will likely to be soft for a second consecutive month.

Elsewhere in Europe, the negative deposit rate route continued to be the talk of the town with ECB Mario Draghi continuing to lend money to banks at least through mid-2014. This is an extension of policy from previous 6-month to more than a year.

Back in Asia, China’s economic growth began to show signs of slackening as export growth plummeted to a 10-month low in May while imports unexpectedly dropped. Contrastingly, the Japanese economy remained on a firm recovery track as the country reported a quicker pace of growth at 4.1% in 1Q13. On a quarterly basis, Japan’s GDP increased by 1%.

Moving back home, the Straits Times Index erased all of its year-to-date gains on fears of interest rate hikes, with stocks such as ISDN Holdings and Halycon Agri Corporation that had experienced run-up recently dropping 18.3% to $1.095 and 15.7% to $0.83 respectively on 10 June. Mirroring the downbeat sentiment, S-REITs dropped as much as 13% following Bernanke’s speech on 22 May, prompting Maybank Kim Eng to downgrade the overall sector from “Neutral” to “Underweight”.

For now, markets are fixated on the timing and amount of money that could potentially be pulled back by the central banks. In the week ahead, Asia will see a slew of central bank meetings, with the Fed’s decision on its monetary policy remain the primary driver of the global market. Will Bernanke be able to provide a clearer picture investors had hoped for? Let’s see how the story unfolds on 19 June FOMC meeting.

Jade manages and oversees a portfolio of stocks which are mainly focused on the mining and property sectors at Shares Investment.

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