ON WEDNESDAY, THE STI jumped 52 points to end at 2,278.96, the highest level in more than a week after being shaken by Wall Street's drop on Monday. It was lifted by an upward revision in economic growth for the world’s industrialised nations. According to a Bloomberg report, the OECD (Organization for Economic Cooperation and Development) raised its forecast for its 30 member states for the first time in two years as the US slump shows signs of easing. The combined economy of the OECD countries will shrink 4.1% this year compared to an earlier forecast of -4.3% in Mar. For 2010, the OECD raised its growth forecast from 0.1% (in Mar) to 0.7%. “It looks as if the worst scenario has been avoided and that OECD economies are now nearing the bottom,” Jorgen Elmeskov, the OECD’s acting chief economist, said in the report. The uplift is largely due to forecasts for the US economy. The OECD predicts that the US economy will contract by 2.8% this year compared to the earlier forecast of 4%, and it will grow 0.9% in 2010, compared to zero growth predicted in March.

 

In Singapore, Citigroup Research, in a report on Monday, notes that a larger than expected upward revision to the 1Q09 GDP, a 24.7% m-o-m jump in April industrial production (IP) and continued positive momentum in May NODX could ‘impute a statistical lift to the full year GDP numbers’. Leading indicators, including the domestic PMI are now signaling expansion, the report points out. “Depending, on the outcome of the May IP figures out this week, we see a strong likelihood that 2Q09 GDP could show double digit q-o-q SAAR (seasonally adjusted annual rate) growth, or between -4 to -6% yoy,” it predicts.
According to Citigroup’s report, ample liquidity drove asset prices (including the stock market) higher. “Our measure of free liquidity (M2 – IP growth) has accelerated sharply while data shows that foreigners had turned net buyers of Singapore equities since April.” it states. Its Singapore equity strategist Chua Hak Bin recently upgraded his STI target to 2,700 (from 2,400).

 

The volatility is opportunity for foreign funds to continue taking stakes in local blue chip companies. Most recently, Templeton Worldwide Inc, in a filing announced it had bought 1.28 million Parkway Holdings shares at $1.58 on June 17, taking its stake to 5.05% from 4.94%.