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Singapore Dollar Ended Negatively against Bolstered Rise in GDP

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Jan. 5 2016, Published 6:41 a.m. ET

Singapore dollar fell even as economic growth surpasses forecasts

The Singapore dollar witnessed a volatile session and ended lower against the US dollar on January 4, 2016. Faster-than-expected growth in the economy was accompanied by outflows catalyzed by the slowing Chinese manufacturing sector. The GDP (gross domestic product) for Singapore rose by 5.7% in the fourth quarter on a quarter-over-quarter basis. Growth expectations were maintained at par with the previous quarter by 1.7%. On a YoY (year-over-year) basis, the GDP advanced in the fourth quarter by 2.0% against the previous quarter’s annualized growth of 1.8%. It exceeded forecasts of 1.3%. This drove the gains in the Singapore dollar during the initial session.

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Lower Chinese PMI dragged down the sentiment

The Chinese manufacturing PMI (purchasing managers’ index) released below the threshold 50 level at 48.2. It was expected to reach 49. This pointed towards contracting manufacturing activity. Also, short positions rose in the Singapore dollar. The report showed that the growth in GDP numbers was driven by an increase in the construction and the services sector against a fall in manufacturing activity. The internal demand seems to be high even though external jitters are still a concern. The fall in the Singapore dollar, even after the release of stronger GDP advancement, implies that investors still aren’t sure about the growth momentum in the future.

Impact on the market

Tracking the fall in the Singapore dollar even after positive economic growth, the iShares MSCI Singapore ETF (EWS) was trading lower on January 4, 2016, by 2.3%. On a similar note, the iShares Asia 50 ETF (AIA) fell during the day by 3.0%

Chinese ADRs (American depositary receipts) also ended on a mixed note. China Southern Airlines (ZNH) was trading lower by 8.5%. Sinopec Shanghai Petrochemical (SHI) ended negatively by 6.3%. Yanzhou Coal Mining (YZC) fell by 5.0%.

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