My Greatest Fear: Currency War

The worst thing that I think can happen during the Trade War is the decision by China to devalue its currency.

The last time it happen in 2015 and 2016, the world stock market took a plunge. 

China is our major trading partner, and since RMB is devalued, companies earning RMB will earn less relative to SGD. 

Asian exports to China will become more expensive. Hence Asian goods and services will become less competitive.

This explains why the market plunge in 2015 and 2016.

Can this lead to a Recession? I really don't know. It's too early to tell.

My view is to Trade and Invest with Caution.

STI broke below 2018 Low of 3338

Dear Clients,

As reported in the news over the weekend, China announces retaliatory tariffs on US$34 billion worth of US goods. This could be the start of an impending global trade war.

Trade war, together with the recent interest hikes by Fed and any further rise in oil prices is likely to slow down economic growth.

Since the start of 2018, the STI Index has been struggling to break out convincingly. Each correction after an attempted rally failed to achieve higher highs. Hence for the last 6 months, the STI has been largely range bound between 3330-3640.

However, the STI has just broken below key support level of 3350 and hit below 2018 low of 3338 this morning. The next immediate support level and key support level is around 3270 and 3200. (Please see chart below).
Are we be witnessing a major correction? If the trade war escalates further, it maybe the start of a bear market.

STI Chart 15.6.2018. Click to Enlarge.

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