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US Interest Rates Hike Could Come In Mid-2015: Yellen
Review, Tradeable | 21 March 2014
By: Brian Brinker
Articles (44) Profile
By: Nicholas Tan
Articles (71) Profile

The FTSE Straits Times Index dropped 23.55 points to close Thursday’s trading at 3,057.20, following an announcement by the US Federal Reserve (Fed) that US interest rates hike could kick in as early as mid-2015. The Fed said that recent weakness in the economy stemmed from adverse weather, and it would continue scaling down its bond purchasing programme to US$55 billion a month.

US Fed officials added the short-term interest rate could rise to 1 percent at end-2015 and at 2.25 percent by the end of 2016, from 0 to 0.25 percent now. Yesterday, Albedo rebutted a Malaysian report of scuttled reverse takeover (RTO) deal and clarified that a planned RTO deal is still on. Albedo shares plunged by as much as 53.8 percent to a low of $0.024 on 19 March 2014 before trading in the counter was halted.

Overall, the broader market saw 136 gainers and 265 losers, with a total trading value at a low of $1.2 billion yesterday.

In Singapore…

More Than 7 Out Of 10 Singaporeans Support 2014 Budget (20/03)
It is no secret that the Singaporean government has been coming under pressure due to the widening income gap in Singapore and the increasing difficulties faced by working and middle-class families. A recent budget poll, however, shows that seven out of 10 Singaporeans approve of the 2014 budget, which promises extra assistance for the poor and elderly.

Among other things, the budget will support the Pioneer Generation Package which will ensure affordable health care for the elderly. Additional money has been set aside for transportation, helping handicapped individuals, and providing relief for lower income families.

The poll surveyed 946 residents with 73 percent of them stating that they approve of the new budget.

Singapore Office Rents Up 3.2% (19/03)
Rising office prices can be a double-edged sword. On one hand, rising prices can squeeze businesses, but on the other hand it suggests that the business sector is picking up and expanding. According to a report released by Colliers International, in the first quarter, rent in Singapore rose a solid 3.2 percent from the fourth quarter in 2013.

The report found that the average monthly gross for premium and grade A office space rose to $8.99 psf in the first quarter. The report also found that occupancy rates expanded from 93.9 percent in 4Q13 to 95.9 percent in the 1Q14.

MAS Projects Economy To Expand By 3.8% In 2014 (19/03)
The Monetary Authority of Singapore is tempering its projections for economic growth this year, revising it down from 3.9 percent to 3.8 percent. The revision is relatively minor and the agency has stated that the tempering was caused by Singapore’s surprisingly strong economic growth in 2013. The higher-than-expected baseline is causing some economists to lower overall growth for this year.

The agency notes that economists are still upbeat about Singapore’s prospects in 2014. For the 1Q14, economists are projecting a strong growth of 5.3 percent. The agency also believes that inflation will remain moderate this year.

Sing Dollar Falls After US Fed Hints At Future Rates Hike (21/03)
The Sing dollar slid nearly 1 percent in trading against the US dollar this past Thursday. The slide came after an unexpected announcement by Fed chairperson Janet Yellen that the US could look to increase interest rates in 2015.

Any potential rise in interest rates likely would not come until after the Fed wraps up its efforts to trim its asset purchasing programme. The said programme is expected to continue through this year. While the Sing dollar will likely continue to appreciate versus other currencies, it may continue to slide versus the dollar.

Around The World…

Yuan Plummets After Trading Band Double (20/03)
The Chinese government is pushing ahead with its efforts to liberalise the yuan despite negative indicators that suggest its economy maybe on rather unstable ground. While some had assumed that the yuan would rise with liberalisation, the exact opposite has occurred thus far.

The yuan has suffered a surprisingly steep decline over the last several days. Since the trading band was doubled, the yuan slipped by 1.3 percent as of early Friday morning. On the year, the yuan has slipped some 2.8 percent, nearly wiping out the 2.9 percent gain the yuan enjoyed in 2013.

China Looking to Stabilise Economy With New Measures (20/03)
It is no secret that China’s economy has been on unsteady ground in recent weeks. Now, the government is looking to stabilise the economy by speeding up construction and using other measures to bolster declining industrial output.

The announcement was made by the State Cabinet and emphasised that these moves have already been planned for. China is looking to maintain solid economic growth this year, but domestic and international factors are placing downward pressure on the economy.

Hawkish Janet Yellen Rattling Global Markets (19/03)
Janet Yellen’s debut as chairperson of the Fed could have gone a bit smoother. Markets around the world were rattled by the mixed message put forward by the Fed chair and US bond interest rates spiked from 2.7 percent to 2.76 percent.

Among the biggest concerns were Yellen’s hints that the Fed could raise interest rates in 2015. Yellen also appears to be set on continuing with the Fed’s plan to taper its asset purchasing program, whereas some emerging market leaders have been looking for reprieve.

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This is a co-written article of Shares Investment, which lays out the analytical ideas and thoughts of the authors, who are well versed in investments and market concepts.

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