Here Are 2 Economic Numbers to Know Now That May Affect Your Investments

As investors, it can be important to be watchful for changes to economic conditions that are happening around us.

Though it’s hard – if not impossible – to predict what the future holds, we should still be aware of the current state of things. Howard Marks, the co-chairman of investment firm Oaktree Capital, once said that “we may never know where we’re going, but we’d better have a good idea of where we are.”

There are two economic numbers investors may want to know about now.

The price of oil

The decline in the price of oil from over US$100 per barrel in 2014 to U$30 earlier this year has brought about significant cuts in capital spending in the oil and gas sector globally.

Recently, the price of oil has risen to over US$40. As the Wall Street Journal reported a few days ago, a possible reason for the surge is a potential freeze in the production levels for some major oil producers.

There are many companies in Singapore’s stock market that are directly or indirectly exposed to the oil & gas sector. According to a November 2014 report by bourse operator Singapore Exchange Limited (SGX: S68), there were 54 stocks back then that belonged to the sector.

Among the biggest are the oil rig builders Keppel Corporation Limited (SGX: BN4) and Sembcorp Marine Ltd (SGX: S51). In 2015, both Keppel Corp and Sembcorp Marine saw their revenue and profit fall by double-digit percentages largely as a result of the difficulties experienced in the oil & gas sector brought on by the fall in oil prices.

Banks are a group of companies in Singapore’s stock market that are indirectly affected by the price of oil because they make loans to oil & gas companies; any weakness in the oil & gas sector can possibly lead to bad debts for banks in their oil & gas portfolios.

There are currently three listed banks here, namely, DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corp Limited (SGX: O39) and United Overseas Bank Ltd (SGX: U11). My colleague Chin Hui Leong had recently taken a close look at each banks’ exposure to the oil & gas sector and you can find out more in here (for DBS), here (for OCBC), and here (for UOB).

China’s inflation

Though there is no direct correlation between the Singapore stock market and the Chinese economy, China is still the second largest economy in the world and a major trading partner of Singapore. Moreover, it’s also a major source of revenue for many Singapore-listed companies, two of which are Wilmar International Limited (SGX: F34) and BreadTalk Group Limited (SGX: 5DA).

Thus, it may be useful to pay attention to general economic conditions in China. The country’s consumer price index (CPI) had climbed by 2.3% in March on a year-on-year basis, which matched February’s CPI increase. This can be seen as a positive for China’s economy as it shows that consumers there are still spending on goods.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.