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A slight gain in GDP figure

Singapore’s Ministry of Trade and Industry (MTI) reported earlier this morning on the 2Q GDP numbers. 2Q GDP grew 1.8% yoy versus estimates for a 1.6% gain. QoQ comparison saw Singapore’s GDP contracting 4%, versus median estimates of a 4.6% contraction. This better than expected number supported a bounce on the SGD as the USD/SGD pulled back in early trading as it attempts to test the 1.38 support. Since the middle of June, it has moved in a single direction, firming from a low of 1.32 to a high of 1.39 last week as it became increasingly clear the bleak outlook of the domestic economy going out the rest of this year. While this news may offer a slight respite to the weakness in SGD, MTI’s accompanying refinement of their 2015 growth forecast from 2-4% to 2-2.5% may suggest that any bounce in the SGD is only temporary as dark clouds (in the business environment) will continue to dim the outlook going forward. From the chart above, key resistance for the DollarSing is at the 1.39 level, followed by 1.4047. Support for this pair could be at the 1.375 level if this morning’s 1.38 does not hold. From a Singapore equity perspective, locally listed banks could be vulnerable to further sell down as key businesses continue to adjust to the slower growth outlook. For clients keen on participating in the locally listed banks, please refer to our note “Pairing up DBS and UOB” on the 4/8/2015 as a possible pair trade on the two banks by taking advantage of the widening spread between DBS and UOB . A pair trade here would be to bet that the spread will eventually narrow while hedging oneself from the overall ‘market risk’.

Noble Group

Noble may continue it’s rebound today. It reported quarterly earnings last night, announcing a decline in 2Q earnings amid a slump in commodity prices. Traders for the stock however, will focus on two things this morning. For one, an endorsement by PricewaterhouseCoopers (PWC) stating that the commodity broker’s valuation of its long-term contracts is in accordance with international accounting standards, and the other, that the company has hired the services of a ‘dealmaker’ - Michael Klein - to “review options” for the company in terms of raising secure financing from banks, or selling a stake in the company. While these two developments are anything but confirmed, just the fact that these developments are in the ‘background’ may bring about some degree of short covering for the stock. Noble is rebounding in early trade this morning, breaking above the first resistance of SGD0.63. The next key resistance is at SGD0.675, also its 50 day MA. First support for the stock is at SGD0.63 followed by last week’s high of SGD0.615.


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