Singapore: STI Index (.STI) – Core inflation hits lowest in more than 4 years at 0.3%

Singapore: STI Index (.STI) – Core inflation hits lowest in more than 4 years at 0.3%

Singapore’s core inflation gauge in January hit its lowest level in four years, data on Monday (Feb 24) showed, due to lower services and retail prices that authorities said would persist as the coronavirus outbreak takes a hit on the country’s economy.

Core inflation rose 0.3 per cent from a year earlier, according to a joint release by the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI), well below analysts’ expectations of 0.8 per cent in a Reuters poll.

It was also the lowest reading since December 2015.

Core inflation – a key policy consideration for the Monetary Authority of Singapore (MAS) – excludes the price of private transport and accommodation.

“In the quarters ahead … economic uncertainty, including the effects of the COVID‐19 outbreak, will likely discourage firms from passing on any cost increases to consumers,” the trade ministry and the Monetary Authority of Singapore said in a joint statement. 

Part of the fall in core inflation was also due to the impact of the rebasing of the Consumer Price Index (CPI) to 2019 as the base year, the authorities added.

The rebasing exercise is done once every five years. It includes changes to the weights, as well as the sample of items and outlets selected for the compilation of the CPI.

The headline consumer price index in January rose 0.8 per cent from a year earlier, slightly below poll expectations of 0.9 per cent.

Private transport inflation rose by 1.3 per cent year-on-year in January, up from the 3.3 per cent increase in the previous month. This was due to a steeper rise in car prices.

The cost of electricity and gas fell at a slower pace to -8.1 per cent year-on-year in January as regulated electricity tariffs increased, even as the Open Electricity Market (OEM) continued to have a dampening effect on overall electricity prices.

Accommodation costs increased to 0.3 per cent year-on-year in January, from the -0.1 per cent in December, in line with a pickup in housing rentals, which saw a turnaround in January after more than five years of decline.

Food inflation was unchanged however at 1.7 per cent as a larger increase in the prices of non‐cooked food was offset by a smaller increase in the prices of prepared meals.

The cost of retail and other goods fell to -1.4 per cent year-on-year in January from the -0.9 per cent in December. This was because the prices of medical products and clothing and footwear registered larger declines.

Lastly, services inflation was lower at 0.5 per cent year-on-year in January mainly on account of a decline in tuition & other fees. 

This reflected the effect of enhanced pre‐school subsidies. There was also a smaller increase in telecommunication services fees, as well as a larger fall in the cost of healthcare services.

The authorities kept their official 2020 forecast range for both core and headline inflation at 0.5 per cent to 1.5 per cent.

Apart from economic uncertainties, external sources of inflation are likely to “remain benign” in the quarters ahead, said MAS and MTI, citing weak demand conditions and generally well-supplied food and oil commodity markets.

Softening labour market conditions on the domestic front could lead to moderation in unit labour cost growth in 2020. 

They expect inflationary pressures to remain subdued in the near term and will be closely monitoring price trends in the coming months, including the impact of the rebasing of the CPI on inflation rates.

On the back of the latest data release, economists from Maybank Kim Eng lowered their forecasts for headline and core inflation this year to 0.9 per cent and 0.7 per cent, from 1.2 per cent and 0.9 per cent respectively.

This is on the back of hopes that Singapore’s manufacturing sector and exports will see a “V-shaped recovery” as factories in China resume production by the second quarter, alongside an “elongated U-shaped recovery” for tourism and air transport.

Noting that they expect contraction of the Singapore economy to be limited to the first quarter, they wrote: “Our base case is for the MAS to maintain the current slight appreciation bias at the April policy meeting, unless the outbreak intensifies and a technical recession appears imminent in Q2 2020.”

Technical Indicators

Overall, the bias in prices is: Downwards.

The projected upper bound is: 3,204.98.

The projected lower bound is: 3,076.86.

The projected closing price is: 3,140.92.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 23 white candles and 24 black candles for a net of 1 black candles.

A falling window occurred (where the bottom of the previous shadow is above the top of the current shadow). This usually implies a continuation of a bearish trend. There have been 5 falling windows in the last 50 candles–this makes the current falling window even more bearish. The two candles preceding the falling window were black, which makes this pattern even more bearish.

Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 6.5976. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 4 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 38.66. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 14 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -171.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 5 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 0 period(s) ago.

Rex Takasugi – TD Profile

STRAITS TIMES closed down -38.830 at 3,142.200. Volume was 17% above average (neutral) and Bollinger Bands were 1% narrower than normal.

Open     High      Low     Close     Volume___
3,159.6403,166.0103,140.3903,142.200 285,617,696
Technical Outlook 
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 3,198.43 3,217.34 3,208.86
Volatility: 13 13 12
Volume: 233,719,232 209,468,000 227,358,528

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

STRAITS TIMES gapped down today (bearish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
STRAITS TIMES is currently 2.1% below its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of .STI at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on .STI and have had this outlook for the last 19 periods.

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