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Crossroad Looms Ahead; Beware Of Pitfalls
Singapore Market Commentary | 22 November 2013
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By: Nicholas Tan
Articles (71) Profile

By now, we would probably have heard of the word “tapering” a billion times, so the key question lies as to whether is tapering good for the economy? Or not tapering is better? At present, it is a difficult answer to give due to the severity of the last crisis and a lack of precedent case.

But, judging by the next Fed chief Janet Yellen’s latest statement, we can assume that the inevitable situation will not happen any time soon as unemployment rate is still lurking some way from the Fed’s target of 6.5% to 7.0%. Yellen remains committed that the US economy and labour market at 7.3% unemployment rate is performing short of their potential and must improve before the Fed starts to put on the brakes to its “hot” money programme.

Throwing a spanner in the works, Goldman Sach’s economist team published a report on Bloomberg, calling on the Fed to reduce its unemployment target by a percentage point, to 5.5% as it argues that the decline in the workforce participation rate over the past decade means that the real unemployment rate is higher than the published number. This sets up a conundrum for the Fed, as to whether should it revise its unemployment rate target or taper as plan and possibly see the economic recovery track derailed?

In the APAC region, the after effects of the super typhoon Haiyan also left a trail of destruction in the local market as stocks exposed to the Philippines such as Del Monte Pacific, Petra Food and Super Group were battled. Though in the long run, the natural disaster is likely to have positive effect on the GDP growth of the Philippines as the government funds fiscal recovery efforts and Filippinos working abroad will likely send more money home to help relatives.

Domestically, the recently concluded 3Q13 earnings did not sprung any positive surprises thus trading sentiment remains weak in the local market with thin liquidity. The benchmark Straits Timex Index was flat for the fortnight closing at 3172.85 on 22 Nov, presumably seeking new catalysts.

Well trained in aspects of finance and business, Nicholas oversees the finance and manufacturing sectors at Shares Investment.

Please click here for more information about this author.

Del Monte Pacific  0.135 -- --   
Business: Co produces processed & non-processed fruit & food pdts, beverages & food ingredients.

Insight: Mar-19, 9M19 turnover fell 10.4% to US$1.5b largel... Read More
Delfi  1.150 -0.050 -4.17%   
Business: A leading regional player in branded consumer confectionery products. [FY18 Geographical] Indonesia (72.3%), regional (27.7%).

Insight: Feb-19, FY18 revenue rose 12% to US$427m on growth... Read More

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