Friday 15 June 2012

Singapore could be worst-hit Asian economy in full-blown euro crisis

By Pamela Koh, Channel NewsAsia, 14 Jun 2012 

Singapore is expected to be one of the worst-impacted economies in Asia, should the eurozone enter into a full-blown crisis.

This is according to a Credit Suisse report released on Thursday.

Singapore's exports to the eurozone directly account for more than 12 per cent of its GDP, and private sector holdings of eurozone debt and equities are the highest in the world outside of Hong Kong.

In addition, eurozone banks also make up a bigger proportion of domestic bank lending in Singapore than other Asian economies.

The uncertainty in Europe has sent jitters across the Singapore stock market, with the Straits Times Index (STI) continuing to extend losses. The key benchmark index ended 0.5% or 13.07 points lower at 2,773.81 on Thursday as it struggles to find solace in the European debt crisis.

But for investors with a mid-to-longer term horizon, some analysts said the time could be ripe for selective bargain hunting for defensive stocks, such as REITS and selected blue chips like CapitaLand, which have seen prices beaten down by the current volatility.

Head of premium client management at IG Markets, Jason Hughes, said: "The valuations you're seeing at the moment, in terms of historic levels, are quite attractive for longer-term investors to try and pick up stocks in this time.

"We're seeing a lot of people focused on high-yielding stocks. So for someone who is focused on holding for two, three or even longer years, then now is the time to start picking up these shares at this price."

Meanwhile, others prefer to stay away, in the lead up to big market-swinging announcements. These include the June 17 Greek elections, European and US consumer prices results and US jobless claims.

Co-head of research at DMG & Partners Research, Leng Seng Choon, said: "We are still going to see a fair bit of volatility in the equity market with a downward bias. Waiting for clearer signs that the debt problem in Europe is going to see some firm action, which will lead to a longer-term solution, would be a better time (to invest)."

The outcomes of the G20 summit and EU Summit later this month are also expected to impact Asian stock markets. 

Analysts raise S'pore growth forecast to 3%
By Aaron Low, The Straits Times, 14 Jun 2012

PRIVATE sector economists have upgraded their growth forecast for the economy this year despite fears over the euro zone debt crisis and slowing growth in the United States and China.

They now expect the economy to expand 3 per cent this year, up from the 2.5 per cent forecast previously, driven mainly by construction and tourism. Official forecasts put annual growth at between 1 per cent and 3 per cent.

Yesterday's survey is a lot more positive than the outlook given by the Ministry of Trade and Industry.

The ministry has warned of significant risks from the euro zone crisis, and noted that the uncertainty over how the situation will be resolved is likely to dampen economic activity here.

The official numbers for the second quarter will be out next month.

The survey of 21 economists conducted by the Monetary Authority of Singapore tipped that construction will expand by 6.2 per cent, much higher than the previously estimated 1.7 per cent.

Much of this will stem from government projects to upgrade transport and build more public housing. Accommodation and food services will also remain a bright spot, largely due to the strong flow of tourists to the country and a tight labour market.

Economists are optimistic exports will grow at a decent pace this year despite a slowdown in the American and Chinese economies.

Economists are also positive on next year's growth, forecasting a 4.5 per cent expansion. However, they expect inflation to stay high at 4.2 per cent this year, on the back of soaring car prices and property rents.

Citigroup economist Kit Wei Zheng said: 'It is one thing to paint a gloomy external backdrop, it is another to extrapolate that precisely into gross domestic product numbers, especially on a quarterly basis.'

Dr Moh Chong Tau, chief executive of Makino Asia, said orders continue to remain brisk as his US customers remain busy.

'Product cycles now are so short, so inventories keep moving. A host of new smartphones and fancy gadgets will be launched, which should ensure a line of orders,' said Dr Moh, who is also deputy president of the Singapore Manufacturers' Association.

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