Singapore: STI Index (.STI) recovery in doubt after shock manufacturing fall

Singapore: STI Index (.STI) recovery in doubt after shock manufacturing fall

Singapore’s factories produced far less than expected in November, underlining the tentativeness of the recovery in the global electronics industry and the continuing fallout from the trade war that has hit export-dependent economies.

The setback, after two months’ of fairly positive data, raises fresh doubts about the outlook for the city-state.

Output from Singapore’s many semiconductor plants plunged a steep 25.7% in the month, according to data from the Economic Development Board. Production of computer peripherals also fell sharply by 31.8%, while the chemicals and pharmaceuticals industries logged more modest declines.

Despite greater activity in the precision engineering cluster, total manufacturing output fell 9.3% in November from a year ago, confounding economists who had forecast either a slight increase or decrease in production.

Oversea-Chinese Banking Corp said it was the largest decline since December 2015. The showing is negative for the “recent green shoots theme developing in the global and regional economic landscape,” said Selena Ling, OCBC’s head of treasury research and strategy.

The shock fall could damp expectations and sentiment in the traditionally quiet Christmas to New Year period. The next major Asian exporter to report data is South Korea, which will release November industrial production figures on Dec. 30. China is expected to release its latest purchasing managers’ index for the manufacturing sector on the last day of the year.

Hopes that Singapore’s manufacturing sector was recovering from the worst effects of the U.S.-China trade war have grown in recent weeks. Factory output rose slightly in September and October compared to a year ago. At the same time, reports by various large semiconductor trade organizations have suggested the industry may have bottomed.

Earlier this week, Japanese broker Nomura said spot prices for DRAMs, a mainstay memory chip, have risen above contract prices, indicating rising demand, while Taiwan reported industrial production rose 2.15% in November, ending two consecutive months of annual declines, due to strong performance by the electronic components industry.

Based on EDB’s latest data, output of electronics, which makes up more than a quarter of total manufacturing, fell 20.9% in November after edging up 0.9% in October. While production by the data storage and the info-communications and consumer electronics segments increased, it wasn’t enough to offset the sharp drop in semiconductors, which account for nearly two-thirds of the electronics segment.

Semiconductor makers with large operations in Singapore include Micron Technology, Infineon, GlobalFoundries and STMicroelectronics.

Output by the precision engineering cluster, however, grew by 9.7% on-year. EDB said there was a higher level of work in front-end semiconductor equipment production along with higher output of optical products, dies, moulds and various metal precision components.

The marine and offshore engineering segment contracted by 10.4% as offshore and shipbuilding activities declined, while the pharmaceutical segment fell 12.7% on account of a different mix of active pharmaceutical ingredients and biological products, EDB said.

Production of chemicals decreased by 10.0% as the petrochemicals segment was depressed by maintenance shutdowns.

On a seasonally adjusted month-on-month basis, manufacturing output decreased 9.4% in November, reversing gains made in September and October.

Technical Indicators

Overall, the bias in prices is: Sideways.

By the way, prices are vulnerable to a correction towards 3,200.68.

The projected upper bound is: 3,273.71.

The projected lower bound is: 3,176.14.

The projected closing price is: 3,224.93.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 4 black candles for a net of 1 white candles. During the past 50 bars, there have been 25 white candles and 23 black candles for a net of 2 white candles.

A hammer occurred (a hammer has a long lower shadow and closes near the high). Hammers must appear after a significant decline or when prices are oversold to be valid. When this occurs, it usually indicates the formation of a support level and is thus considered a bullish pattern.

A hanging man occurred (a hanging man has a very long lower shadow and a small real body). This pattern can be bullish or bearish, depending on the trend. If it occurs during an uptrend (which appears to be the case with STRAITS TIMES) it is called a hanging man line and signifies a reversal top. If it occurs during a downtrend it is called a bullish hammer.

A long lower shadow occurred. This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold).

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

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 90.9238. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 15 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 56.81. 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 sell 34 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 75. This is not a topping or bottoming area. The last signal was a sell 0 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 buy 9 period(s) ago.

Rex Takasugi – TD Profile

STRAITS TIMES closed up 1.320 at 3,222.990. Volume was 70% below average (consolidating) and Bollinger Bands were 46% narrower than normal.

Open     High      Low     Close     Volume___
3,221.8303,222.9903,205.9903,222.990 71,769,504
Technical Outlook 
Short Term: Overbought
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 3,213.06 3,207.86 3,224.14
Volatility: 4 10 12
Volume: 180,391,584 265,537,440 226,874,016

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 is currently 0.0% below its 200-period moving average and is in an downward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. 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 20 periods.

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