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Happy New Year, May Not Be So Happy After All
Singapore Market Commentary | 15 January 2016
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“A good beginning is half the battle”, a saying that has no place in describing the New Year as the start of 2016 has been anything but good.

Entering into the New Year, in the first week we saw the Shanghai Composite Index crashed another 5.29 percent on the first trading day of the year. What followed were prices that fell so low that it triggered the so-called circuit breakers that was introduced in the wake of a similar crash last August, not once but twice. On 7 January 2016, prices fell 7 percent in just 29 minutes, triggering the circuit breaker and caused the shortest trading day in Chinese history.

The turmoil sent global markets spiraling down out of control, wiping out more than US$2.3 trillion off shares value in a week. At home, the Straits Times Index (STI) also plummeted, falling alongside regional markets and closed at 2691.78 on 12 January 2016, retreating 6.6 percent since the first trading day.

Next, we saw no signs of any recovery in the oil market, with oil prices plummeting below US$30 a barrel, the first time since December 2003, representing a 72% plunge from the peak of almost US$108 in June 2014. With such dismal performance, the oil industry took a big hit, notably from the possibility of Sete Brasil, one of the largest rig owners in the world, filing for bankruptcy protection soon.

The spillover effect doesn’t stop there as well, as we see that Sete Brasil is a major customer of home-grown giant conglomerates Keppel Corporation and Sembcorp Marine.

With such an ominous start to the year, greater volatility and turmoil expected to follow with increasing Fed rates, lower oil prices and stock market crashes, investors could consider taking a more defensive stance in their investment decisions.

Keppel Corp  6.200 -0.14 -2.21%   
Business: [FY18 Turnover] Infrastructure (44.1%), offshore & marine (O&M) (31.4%), property (22.5%), investments (2%).

Insight: Apr-19, 1Q19 revenue rose 4.1% underpinned by high... Read More
Sembcorp Marine  1.520 -0.030 -1.94%   
Business: Co is a leading global marine & offshore engineering group. [FY18 Turnover] rigs & floaters, repairs & upgrades, offshore platforms (98.8%), ship chartering (1%), others activities (0.2%).

Insight: May-19, 1Q19 revenue fell 31.3% to $810.6m due to ... Read More

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