A year later, the outlook certainly appears to be more optimistic though we may have to bring back the catchphrase of “cautious optimism” going into the new year as we search for clarity.
The start of the year saw the dollar being the true bull. The week of US non-farm payrolls (NFP) led the market to the US dollar where the USD index was seen rising from sub-102.50 levels to 102.80 levels on Monday. As things stand, the market consensus matches the previous figure for the upcoming NFP data release which had been the strongest figure printed since September and could keep rate hike expectations afloat.
The strong dollar wind will exert some pressure for Asian currencies in the day, especially for onshore markets which had been away through the new year.
European markets which were open rallied on the broadly stronger set of manufacturing data while China’s December official manufacturing PMI is unlikely to do much for Asian markets despite remaining in expansion territory for the sixth consecutive month.
At 51.4, the index declined from 51.7 in November and fell short of the market consensus of 51.5. The market will be keeping a keen eye on the private Caixin manufacturing PMI gauge in the day to see if the data trends are aligned which could sway markets.
Singapore’s Q4 GDP
Notably, Singapore’s Q4 GDP came in at 1.8% year-on-year (YoY), 9.1% quarter-on-quarter (QoQ) seasonally adjusted annual rate (SAAR), significantly surpassing the market expectation of 0.3% YoY and 4.0% QoQ SAAR. This brings the full year 2016 growth to 1.8% YoY, a 0.2 percentage point slowdown from 2015.
A drill down to the sectors finds the manufacturing sector pulling its weight, expanding 14.6% QoQ. Services recovered slightly from a dismal Q3 performance, while construction worsened to fall 4.7% QoQ for the final quarter of the year. USD/SGD fluctuated ahead of the release but made little downward progress despite the data, evidently reminded that this is the slowest growth since 2009. This is also against the backdrop of a stronger US dollar. At 1.8% full year growth, the figure had nevertheless beaten the government’s forecast of 1.0-1.5% growth and could cast away some of the concerns for the need of another easing in the next Monetary Authority of Singapore (MAS) meeting.
Japan markets remain closed on Tuesday for the New Year holidays. KOSPI, the early movers, was last seen in black though our opening calls expect some pressure for the Hong Kong and Singapore markets. Attention to be on China’s Caixin PMI and Singapore’s December manufacturing PMI for the local market today.