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Singapore stocks fall back on double whammy of Turkey crisis, Q2 GDP miss

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THE Singapore share market extended its slide on Monday amid a dimmer economic outlook and a financial crisis in Turkey, entering the midday trading break with the benchmark Straits Times Index at 3,245.31, down 1.2 per cent or 39.47 points.

Losers almost outnumbered gainers two to one after 1.2 billion shares worth S$560.4 million changed hands.

Among the key index stocks, Singapore Telecommunications shed 2.2 per cent, or seven Singapore cents, to S$3.07. Property developer CapitaLand lose 1.8 per cent, or six Singapore cents, to S$3.25.

"The reaction seen across markets appears to be one assuming the worst-case scenario rather than simply the current implications," said IG market strategist Pan Jingyi.

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Singapore stocks fell 1.3 per cent on Friday as the lira plunged in a deepening crisis spurred by Turkey's worsening spat with the US, which sanctioned the country over its detention of an American priest.

The ongoing crisis in Turkey continued to dominate market concerns as the lira fell to record lows. Spillover fears dragged other emerging currencies lower, including the Indonesian rupiah. The rupiah weakened against the Singapore dollar, with one Singapore dollar worth10,612.69 rupiah at lunchtime, 29.41 rupiah more than the previous close.

The price of gold fell US$2.55 to US$1,207,73 per ounce.

In a note to investors, OCBC Treasury Research analyst Terence Wu said that the impact of Turkey on the emerging Asian currencies may come through in a stronger US dollar.

"At this juncture, we do not expect the de-risking across global emerging markets to hit emerging Asian assets in an outsized way," he wrote. "Nevertheless, expect the Asian Currency Index to push higher early week, although to a more moderated extent compared to other emerging market currencies."

Corporate borrowings are likely to be insulated from Turkey as well, according to DBS rates strategist Eugene Leow.

"Asia should not see any contagion effect fundamentally due to the ongoing crisis in Turkey as the region does not have a meaningful exposure to the country," he said.

"Based on Bank for International Settlement data, of the around US$265 billion of exposure to Turkish counterparties reported globally as of March 2018, Asian banks did not have any exposure (with the exception of Japan at around US$14 billion). Our understanding is that corporates, in general, also have negligible Turkish exposure. Hence, the impact on Asian credits will be more from perspective of weak emerging market sentiment rather than fundamentals."

Sentiment in Singapore was also affected after latest economic growth numbers missed expectations with a slower outlook for the rest of the year.

Singapore GDP (gross domestic product) growth eased to 3.9 per cent year-on-year in the second quarter, from 4.5 per cent in the first three months of the year, the Ministry of Trade and Industry (MTI) announced on Monday. The ministry is maintaining its 2018 forecast of 2.5 to 3.5 per cent growth for full-year 2018, but expecting a slowdown in the second half of the year.

The second-quarter growth beat advance estimates of 3.8 per cent, but missed a market consensus forecast of 4.1 per cent growth.

DBS senior economist Irvin Seah said that the second-quarter slowdown was a "normalisation" from the peak of the electronics cycle, and that manufacturing and services continued to show strong support for the economy.

"That said, clouds in the horizon are gathering," Mr Seah said. "Trade actions between Singapore’s two largest export markets, the US and China, could indirectly affect Singapore. Tighter liquidity conditions and mounting pressure on regional currencies could also weigh down on investor confidence and business sentiments. Watch trade figures in the coming months for telltale signs for slowdown in growth. Expectations are for the third quarter’s growth to be the weakest this year, which will also pare down consensus expectations for the full year growth rate."

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