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Rough Seas Ahead As Shipping Slump Continues
Singapore Market Commentary | 09 September 2016
By: joey.hoyw
Articles (1) Profile

In an exciting fortnight of trading, tech-heavy Nasdaq Composite inched up 0.7 percent to close at 5,259.48 on 8 September. The index hit a record high of 5,287.61 on 7 September, but pulled back the next day after a less-than-inspiring launch of Apple’s new iPhone 7, which saw the tech giant’s share fall 2.6 percent in the session. Meanwhile, the S&P 500 was up a marginal 0.5 percent from 26 August to end at 2,181.30 on Thursday, 8 September.

Making the headlines recently, the world’s seventh-largest shipping firm, Hanjin Shipping, filed for bankruptcy. The global shipping industry continues to suffer as global trade slows. According to a July report by brokers JLT Speciality, the cost of chartering a container vessel has plunged from 2008 highs of US$200,000 a day to just under US$5,000 a day. With no sign of recovery, the shipping industry is estimated to make a loss of at least US$6 billion in 2016, forcing a consolidation in the industry as shipping giants seek to strengthen their balance sheet. Following the recent buyout of Singapore-based Neptune Orient Lines, a looming merger between German shipping line, Hapag-Lloyd and United Arab Shipping Company is set to form the world’s fifth-largest container shipping line.

Over in China, economic data revealed an unexpected increase in imports in August for the first time in close to two years. The global economic powerhouse also showed signs of improvement in exports, which fell by a less-than-expected 2.8 percent year-on-year. The stronger imports came about as China cut back on domestic coal mining in favour of importing higher quality supplies, while exports beat forecasts for a decline of 4 percent as shipments to the European Union rose 2.4 percent.

The Singapore market put up a short rally during the week as weaker-than-expected US jobs data tapered expectations of a September rate hike. After the European Central Bank downplayed the need for more economic stimulus though, the benchmark Straits Times Index fell 0.7 percent on Friday, closing at 2,873.33 points versus 2,857.65 points two weeks ago.

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