YUAN DEVALUATION- Why and its Affects on Singapore

China devalued its tightly controlled currency, roiling global financial markets and driving expectations the yuan could be set for further falls.

China’s devaluation may be best seen as a distress signal from Beijing policymakers – in which case the world’s second-largest economy may be far weaker than the 7% a year growth that official figures suggests. China has been trying to engineer a shift from export-led growth to an expansion based on consumer spending – while simultaneously trying to deflate a property bubble.

WHY???

The central bank said it took action because

• Yuan has been rising in value when market forces indicated it should have fallen.
• Yuan has been pushed up because its exchange rate is heavily influenced by the US dollar, which has been strengthening on expectations of a hike in US interest rates.
• But the devaluation is widely seen as a move to bolster the economy which is struggling to achieve its 7 per cent growth target. This move will help exports to improve.
• Over the weekend, China reported that its exports plunged by an unexpectedly wide margin of 8.3 per cent in July. The currencies of other developing countries have also fallen, making Chinese exports relatively more expensive.

Leading to Currency wars.....

Currencies fell on fears a weaker yuan could threaten other economies in the region that compete with Chinese exports and encourage their central banks to devalue their currencies to stay competitive.

Ironically, while the much-talked-about devaluation of the renminbi has been a mere 2.8% so far, many currencies in Asia and emerging markets (EMs) have seen a far greater depreciation over the same period, as you can see from the chart.

Sierra Leone’s leone slumped 20%, the Kazakhstan tenge plunged 20.17%, while Malaysia’s ringgit, Russia’s rouble, Turkey’s lira and the Mexican peso all fell between 4% and 7%, as you can see from the chart. The Indian rupee, Taiwanese dollar and Vietnamese dong have all declined more than 3% since 7 August.

WIDER ECONOMIC IMPLICATIONS

• Depreciation of other Asina currencies - It could also result in a new Asian currency war. Yuan devaluation puts pressure on other central banks around the world to push down their own currencies to help their own exporters and to prevent destabilising capital flows.
• Delay in increase in US interest rate - It could delay a highly anticipated hike in US interest rates by the Federal Reserve. The yuan's devaluation has put even more upward pressure on the US dollar. Continued dollar strength is problematic for the Fed since it hurts exports and lowers inflation as well as weakens corporate profits.

Affects on Singapore

• Singapore’s economy shrank by 4% in Q2/2015 due to the SGD’s strength against most of our major export markets which is led by China, Malaysia, Hong Kong, Indonesia, Europe and US.
• In two days of devaluation, the People’s Bank of China wiped out the Singapore dollar’s relative weakness against the yuan that the MAS engineered for Q3/2015. However the MAS cannot simply follow the China’s move to regain that export edge.
• While a weaker SGD would stimulate our exports, it also means higher interest rates for homeowners when the U.S. Fed is poised to raise interest rates. The recent Chinese devaluation weakened the SGD and caused the 3-month SIBOR to spike 6.3% in one day.

China may further depriciate Yuan. Such prolonged uncertainties will affect business and consumer confidence, which will slow down consumption and economic activities. If these happen, the broader economy may be further hurt at a time when global outlook remains sluggish.

Singapore slashed the upper end of its previous 2 to 4 per cent annual growth forecast, amid ongoing risks from an uncertain external environment and a slowdown in global trade, and market watchers have cautioned of an equally cloudy outlook in the coming months.

An export-dependent country; a downward pressure on exports can be seen, the Purchasing Managers’ Index readings on new orders and new export orders, which, in turn, will have an impact on production and export figures.

If we take a look at the Singapore dollar nominal effective exchange rate, it has moved towards the bottom of the policy band, suggesting even more loosening of the monetary policy for the economy.

SGX Outlook: Weekly Technical Analysis for STI

WEEKLY WRAP OF STI

Straits Times Index (STI) opened at 3114.56 and ended -4.40 points or 4.40% lower to 2971.01 this week. STI came off from its weekly peak of 3116.36 and low of 2948.14. 

STRAIT TIMES WEEKLY WRAP
OPEN	3114.56
HIGH	3116.36
LOW	2948.14
CLOSE	2971.01
CHANGE (In Points)	-137.15
% CHANGE	-4.40

Banks, properties and oil and gas heavy weights hit at the moment which are dragging the index lower.

This week has’nt been good for the local stock market, with the Straits Times Index (STI) dropping five days. Volume has been thin in the market. For the week, the STI lost about four points.

Singapore Exchange is proposing the introduction of an Affiliate Segregation rule, whereby the collateral of an affiliate of an SGX Derivatives Clearing (SGX-DC) member is protected if the member defaults on its own contracts.

Support 1	Support 2	Support 3	Resistance 1	Resistance 2	Resistance 3
2948	2882	2794	3115	3215	3281

 LOCAL BOURSE

Local banks' loan growth is likely to subdued remain in coming quarters, though the lenders may benefiit from higher net interest margins with the imminent rise of interest rates, Fitch Group's BMI Research says in a report released on Friday.

Singapore is likely to remain stuck in the grip of deflation when the Consumer Price Index (CPI) for July is released next week.

Singapore-based online retailer RedMart has raised US$26.7 million ($37.5 million) in funding from investors, including Garena, Facebook co-founder Eduardo Saverin and SoftBank Ventures Korea.

STI Technical Analysis Review and Market Forecast

Market Review for STI:
Straits Times Index opened lower on Tuesday, following the retreat in equity markets in Tokyo, the US and Europe after the Shanghai stock exchange suffered its largest one-day fall of 8.5 per cent in eight years on Monday which sparked concern about global economic growth.
STI ended 32.33 points or 0.98 % lower to 3281.09. Singapore stocks traded in negative territory at midday, in line with broad declines in other Asian markets. STI came off from its intra-day peak of 3306.63 and low of 3277.13.
Singapore's central bank will probably hold off from further monetary easing at its next policy review in October.

STI Day Performance
Open	3305.63
High	3306.63
Low	3277.13
Close	3281.09
Change(Points)	-32.33
% Change	-0.98%
Volume	2254.9 M
Rise	144
Fall	278
Unch	372

Market forecast for STI:
Straits Times Index has broken the support of 3295 and is expected move sideways. There is a short term support at 3265, it is likely to rebound from this level. However if it breaks this level it might further go down.

STI LEVELS
Support 1	Support 2	Support 3	Resistance 1	Resistance 2	Resistance 3
3265	3223	3200	3312	3346	3385

Technical Indicators:
RSI is below centre line at 38.575 and CCI is at -112.49. Difference line of MACD performed at -4.310 below its signal line which performed at -3.862.

Top Gainers			Top Losers
Scrip Name	CMP	%change	Scrip Name	CMP	%change
CHINA HONGCHENG	0.019	375	GREEN BUILD	0.255	-15
CHINA GREAT LAND	0.033	230	METRO	0.915	-8.5
CHINA ESSENCE	0.021	162.5	YZJ SHIPBLDG SGD	1.27	-3.42
CN15500MBECW150929	0.054	63.64	PETRA FOODS	3.25	-2.99
ZHONGXIN FRUIT	0.035	52.17

Important Factor for today:-

• European shares bounced in early trading on Tuesday after falling in the previous five sessions, with some strong company results and mergers and acquisitions news supporting the market.
• Chinese shares fell on Tuesday, as Beijing scrambled once again to prop up a stock market whose wild gyrations have heightened fears about the financial stability of the world's second biggest economy.
• Gold hovered near its weakest level since early 2010 on Tuesday, reflecting investor hesitation to bid up bullion amid growing expectations of a near-term hike in U.S. interest rates. The Federal Reserve begins a two-day meeting later in the day where policymakers are likely to signal that a rate hike later in the year is certain as the U.S. economy strengthens.
• Oil prices fell towards four-month lows on Tuesday, dropping for a fifth straight session on persistent worries about a global supply glut, while stock market sell-offs on both sides of the Pacific also rattled investor sentiment.
• Dollar firmed on Tuesday as cautious investors covered short positions ahead of the start of a two-day U.S. Federal Reserve meeting and as a continued slump in Chinese equity markets sapped appetite for riskier assets.
• Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) reported a 55% drop in second quarter net profit from a year earlier, on lower income from its oil and gas structure construction unit.
• Indonesia will impose a levy on palm oil exports starting on Thursday after weeks of delay, providing as much as 4.5 trillion rupiah this year to state coffers.
• Treasury yields decline for a fifth trading day on Monday, recording the longest losing streak since April 17, as investors seek safe assets during a global stock selloff led by a sharp decline in Chinese markets.

Singapore Stock Market: STI Technical Analysis & Forecast

Market Review for STI: Straits Times Index (STI) opened 0.3 per cent higher with STI advancing 9.12 points to 3,368.29, as gold prices stemmed a slump. STI ended 2.1 points or 0.06% lower to 3371.40. STI came off from its intra-day peak of 3375.97 and low of 3360.12.Singapore stocks inched up at midday on lack of direction and interest.

Singapore’s inflation rate remained in negative territory in June, although it inched up to -0.3 per cent from -0.4 per cent in May due to larger increases in the costs of services, food and private road transport. Singapore's annual consumer prices fell for the eighth straight month in June, an outcome that could give the central bank room to ease policy if economic growth disappoints.

STI Day Performance
Open	3371.12
High	3375.97
Low	3360.12
Close	3356.4
Change(Points)	-2.80
% Change	-0.08%
Volume	2292.0 M
Rise	187
Fall	230
Unch	390

Market forecast for STI: Straits Times Index is expected to take sideways in next rading sessions. It has its resistance level at 3387, if it breaks this level it might go further up.

STI LEVELS
Support 1	Support 2	Support 3	Resistance 1	Resistance 2	Resistance 3
3345	3288	3247	3387	3437	3473

Technical Indicators:

Top Gainers			Top Losers
Scrip Name	CMP	%change	Scrip Name	CMP	%change
FUXING CHINA	0.55	25	HSI25600MBEPW150730	0.082	-26.79
STARLAND	0.18	21.62	EASTERN	0.168	-25.33
RAFFLES UNITED	0.171	13.25	OCBC BK MBEPW151103	0.091	-22.22
CEFC INTL	0.28	12	HSI26400MBEPW150730	0.193	-16.09
LOTTVISION LTD1	0.405	10.96	REGAL INTL	0.22	-15.38

Important Factor for today:-

• Falling Chinese stock markets and the Greek debt crisis have raised concern about demand, while the Iranian nuclear deal could lead to higher oil exports from the Islamic Republic.
• Oil product inventories surged to their highest since at least 1999, signs that markets are struggling with a supply glut that could prompt refineries in the region to cut rates.
• US home resales rose in June to their highest level in nearly 8-1/2 years, a sign of pent-up demand that should buoy the housing market recovery and likely keep the Federal Reserve on track to raise interest rates later this year.
• European Economic and Monetary Affairs Commissioner Pierre Moscovici said creditor institutions were seeking to conclude talks with Greece on a third bailout in the second half of August.
• apan's economy is expected to expand at a slower pace in the second quarter than projected a month ago in the face of weak consumer spending and exports.
• China stocks rose sharply on Thursday, with the Shanghai Composite index up for the sixth consecutive session, led by blue chips, after the government reaffirmed its support for the market.
• European bonds rallied after Greece's parliament approved a second set of creditor-imposed reforms.
• Greek Prime Minister Alexis Tsipras on Thursday pledged his government would never allow banks to seize the primary residences of Greeks as parliament prepared to vote on a bill that toughens rules on foreclosures.
• South Korea's economy slowed in the second quarter, with consumer spending stifled by an outbreak of Middle East Respiratory Syndrome (Mers) and exports failing to lift from a lengthening slump.
• Oil prices were mixed in Asia on Thursday, with WTI stuck below US$50 a barrel after a rise in US stockpiles added to concerns over a supply glut, analysts said.
• Gold's fallen out of favor with investors as the Federal Reserve prepares to increase borrowing costs, boosting the dollar.
• Ringgit fell the most in more than two weeks as a decline in commodity prices erodes the outlook for Malaysia’s export earnings.
• Oil prices fell on Wednesday after US government data showed higher crude stockpiles, adding to concerns about a global supply glut.

Singapore SGX : Technical Analysis Report

Market Review for STI: Singapore share prices opened stronger, with the STI up 9.94 points or 0.3 per cent to 3,342.88, ahead of an emergency meeting of European leaders and finance ministers on Greece. STI came off from its intra-day peak of 3346.48 and low of 3340.93. Volume amounted to 716.4 million shares.
Singapore shares traded sideways, against a backdrop of mixed performance from other Asian bourses. Meanwhile, mainland Chinese markets extended declines as investors wind down margin trades. Singapore shares continued to dither between gains and losses, amid a mixed performance in other Asian bourses.
Singapore will provide advance estimates of gross domestic product (GDP) for the second quarter at 8 am on July 14. Singapore Exchange welcomes Noble's decision to carry out a review of its mark-to-market models and valuations as this will address and help bring closure to questions raised by the market on this issue.

STI Day Performance
Open	3342.20
High	3346.48
Low	3327.70
Close	3340.93
Change(Points)	+7.99
% Change	+0.24%
Volume	1171.9 M
Rise	172
Fall	210
Unch	433

Market forecast for STI: STI is expected to take side ways trend. If it breaks its resistance level of 3360, it might take bearish trend.

STI LEVELS
Support 1	Support 2	Support 3	Resistance 1	Resistance 2	Resistance 3
3317	3290	3262	3361	3387	3465

Technical Indicators: RSI is below the center line at 48.959 CCI is at 53.416. Difference line of MACD performed at --13.482 below its signal line which performed at -20.333.

Top Gainers			Top Losers
Scrip Name	CMP	%change	Scrip Name	CMP	%change
CITYDEV	9.9	2.38	ASCENDAS REIT	2.44	-2.58
COMFORTDELGRO	3.02	1.17	CAPITALAND	3.53	-2.23
DBS	20.98	0.99	CAPITAMALL TRUST	2.19	-1.3
GENTING SING	0.905	0.97	CITYDEV	9.9	-1.23
GLOBAL LOGISTIC	2.51	0.92	COMFORTDELGRO	3.02	-0.8

Important Factor for today:-

• Malaysia plans to cut more subsidies and move billions of dollars in government employee housing loans off its balance sheets to bolster its fiscal position, even as a growing scandal threatens Prime Minister Najib Razak’s ability to implement potentially unpopular policies.
• China’s stocks fell early Tuesday, casting doubt on the potency of Beijing’s aggressive rescue efforts, while investors elsewhere in Asia appeared to shrug off concerns over Greece’s debt situation.
• Athens stock exchange will remain closed until Wednesday, the Greek Capital Markets Commission said, in line with the closure of the country's banks as Greece races to avert bankruptcy and remain in the euro.
• European shares steadied on Tuesday after slipping in the previous session, with investors focussed on crunch talks over the Greek debt crisis at a euro zone summit later in the day.
• Indonesia's government will not introduce new taxes or raise existing ones this year in order to achieve its revenue collection target, a finance ministry official said on Tuesday, raising prospects of a wider fiscal deficit unless spending is cut.
• European stock and bond markets steadied on Tuesday before a euro zone leaders summit to discuss the Greek debt crisis while a further fall in Chinese shares reminded investors of other dark clouds on the horizon. Oil recovered some ground after Monday's stomach-churning selloff prompted by Greeks' overwhelming rejection of the terms of a bailout deal and the Chinese stock markets turmoil.
• Japanese stocks came bouncing back Tuesday morning, shrugging off foreign selling and a negative cue from the U.S. to focus instead on stock-positive drops for oil and the yen.
• Oil futures sank to their lowest settlement in nearly three months Monday, as traders fretted the fallout from Greek turmoil as well as a potential Iranian nuclear deal, which may result in a flood of millions of barrels of oil to global supplies.