Core inflation in Singapore fell to 0.8% in July, the lowest in three years. Overall inflation eased to 0.4% from 0.6% in June. This prompted the Monetary Authority of Singapore to downgrade the full-year core inflation forecast to “within the lower half of the one to two percent forecast range, from “near the midpoint”.
Earlier this year, the MAS slashed its forecast for economic growth to between 0 and 1% from 1.5 to 2.5%.
The 10% tariffs on the remaining US$300 billion worth of Chinas imports would slow China’s annual economic growth to below 2%, according to a Bloomberg survey.
Analysts expect the tariffs, which are scheduled to come into effect later this year, will cut China’s economic growth by 0.5 percentage points. However, analysts are not expecting the People’s Bank of China to cut interest rates in the medium term in its policy meeting next week.
Analysts have slashed Hong Kong stocks’ profit forecasts for 2019. On average, they expect around a 19% decline in operating income for companies within the Hang Seng Index. This would be the biggest contraction since the global financial crisis of 2008.
Meanwhile, Alibaba has reportedly delayed its US$15 billion (S$20.7 billion) listing in Hong Kong due to the political unrest in the city. This is another setback to the Hong Kong market, which saw global brewer Anheuser-Busch Inbev cancel a planned initial public offering of its Asia-Pacific unit in Hong Kong that was worth up to US$9.8 billion. The city’s stock market loosened its rules to attempt to attract more Chinese companies to list there.
Besides the protests around the city, a weak yuan is also expected to weigh heavily on Hong Kong companies’ earnings. Constituents of the Hang Seng Index derive an average of 64% of their revenue from Mainland China and 22% from Hong Kong. The yuan broke past the seven per US dollar mark earlier this month.
Since the start of the protests, Hong Kong stocks have lost more than US$600 billion in value.
In the United States, a survey by the National Association for Business Economists found that the majority of economists expect a US recession within the next two years.
However, more economists have shifted their recession prediction to 2021, rather than 2020 after the shift in monetary policy by the Federal Reserve. The Fed cut interest rates for the first time in over a decade in its last policy meeting.
Singapore investors are starting to feel the impact of the slowing economy. According to a recent report found that US$3.8 billion (S$5.3 billion) of dividends were paid out in Singapore in the second quarter, down 11.6% from the same period last year. On a brighter note, Singapore’s underlying dividend growth, which adjusts for special dividends, changes in currency, timing effects and index changes, rose 17.7%.
Total dividends paid globally this quarter rose 1.1% to US$513.8 billion.
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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 Jeremy Chia doesn’t own shares in any companies mentioned.