Singapore Fastest Growing In The World
Singapore’s growth accelerated to a record 18.1 percent pace in the first half of 2010, spurring the currency, putting pressure on policy makers to check inflation with a stronger currency, and putting the island on course to be the fastest-growing economy in the world this year.
The government predicts GDP will rise 13 percent to 15 percent in 2010. Credit Suisse Group AG and Oversea-Chinese Banking Corp. forecasts for the island’s expansion this year range from 12.7 percent to 16.3 percent among the economists surveyed by Bloomberg.
By comparison, Goldman Sachs, BNP Paribas and Macquarie and China International Capital Corp estimates for China range from 9.5 percent to 10.1 percent in recent weeks.
Multiple Industries
A year after Singapore exited its worst recession since independence in 1965, tourists are arriving in record numbers and companies including Standard Chartered Plc are boosting hiring. The expansion is part of a rebound across Asia that has prompted South Korea, Malaysia, Taiwan and India to raise interest rates in recent weeks, even amid concern Europe’s debt crisis may impair global growth.
Growth in the trade-related sectors including pharmaceutical output was bolstered by healthy global trade flows, while the openings of the integrated resorts and higher visitor arrival numbers contributed to the growth in the tourism-related sectors. The financial services sector also grew strongly, supported by increased foreign-exchange trading and domestic bank-lending activities.
Stock Performance
Singapore’s benchmark stock index has climbed 28 percent in the past year, more than Hong Kong’s Hang Seng and Taiwan’s Taiex, while the Shanghai benchmark has fallen 22 percent.
Monetary Tightening
Price pressures are already evident and we expect the central bank to be watching if inflation expectations are raised because of these numbers. Wage pressures are increasing and inflation may reach 5 percent by the end of 2010, from 3.2 percent in May.
There are now higher odds for the MAS to tighten further in October via a steeper appreciation. The central bank uses the Singapore dollar instead of interest rates to manage inflation, and on April 14 allowed a revaluation and shifted to a stance of gradual appreciation.
Cracks Showing
Singapore’s ties to the global economy mean it’s unlikely to escape the impact of any renewed slowdown. Governments in Europe are embarking on austerity programs to cut budget deficits and households in some of the world’s largest economies are holding back spending, clouding the outlook for the rebound.
Some cracks are starting to show in the global economy. Drugs and tourists likely boosted second- quarter growth above the first quarter but a Jekyll-Hyde year may see a weaker second half. Signs of a “slowdown in the labor market” in the U.S. have affected consumer confidence, and “sluggish final demand” from the world’s largest economy as well as Europe has led to a moderation in manufacturing in Asia,” the ministry of trade and industry said.
I see STI resistance at 3,000 points, a level every amateur will also conclude at. However, I believe we will end this year trying to break 3,200. I expect the USDSGD to appreciate to 1.35 in the coming months.
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