Skip to main content

Advertisement

Advertisement

Singapore markets may face crunch amid euphoria in US

Markets around the world rallied last year after Mr Donald Trump’s surprise victory in the United States presidential election. US equity indices surged on the promise of then-president-elect Trump’s business-friendly initiatives, which included massive corporate tax cuts, heavy fiscal spending and long-awaited deregulation.

US President Donald Trump pauses during a meeting in the Roosevelt Room of the White House in Washington, Wednesday, Feb 1, 2017. Photo: AP

US President Donald Trump pauses during a meeting in the Roosevelt Room of the White House in Washington, Wednesday, Feb 1, 2017. Photo: AP

Markets around the world rallied last year after Mr Donald Trump’s surprise victory in the United States presidential election. US equity indices surged on the promise of then-president-elect Trump’s business-friendly initiatives, which included massive corporate tax cuts, heavy fiscal spending and long-awaited deregulation.

The US dollar also climbed on expectations of higher rates of inflation that would result from these policies, which were expected to give the US Federal Reserve more headroom for interest rate hikes this year.

While many market observers expected this “Trump rally” to fizzle by the turn of the new year, recent movements in the markets have suggested otherwise, as the earlier hopes were revived with Mr Trump’s swift affirmation of his campaign promises after he took office.

However, amid the euphoria seen in the US markets, Singapore’s markets may suffer a crunch, especially from Fed tightening.

While the recent interest rate hike by the Fed may have seemed justified given significant improvements in the US labour market and price inflation trends, some firms in Singapore may suffer a profit squeeze arising from the higher cost of financing.

The oil and gas sector in Singapore remains troubled by weak business prospects despite the recent recovery in global crude prices, while the real estate sector continues to cool. Although the banking sector initially benefited from the “Trump rally”, it is still suffering from an increasing need for doubtful debt provisions and write-downs due to non-performing loans. All this is happening against a backdrop of a sluggish domestic economy amid an uncertain international landscape.

Will the Singapore economy be able to navigate and rise above the challenges ahead for 2017? Only time will tell.

 

ABOUT THE AUTHOR: Woon Tian Yong is an analyst at Phillip Futures.

Read more of the latest in

Advertisement

Advertisement

Stay in the know. Anytime. Anywhere.

Subscribe to get daily news updates, insights and must reads delivered straight to your inbox.

By clicking subscribe, I agree for my personal data to be used to send me TODAY newsletters, promotional offers and for research and analysis.