MAS unexpectedly tighten and what comes next for the China A50
Tony Sycamore October 14, 2021 9:50 AM
The central bank of Singapore, The Monetary Authority of Singapore (MAS) unexpectedly tightened its monetary policy settings today, to “ensure price stability over the medium term” amid higher inflation.
At its biannual meeting, the MAS said it would raise the slope of its currency band slightly from zero previously while maintaining the width of the currency band at which it is centred.
The currency is a primary tool of MAS monetary policy. Increasing the slope of the band has allowed the currency to appreciate, thereby reducing the price of imports and easing inflationary pressures.
Of the thirteen economists polled by Reuters ahead of the event, eleven predicted that the central bank would keep its monetary settings on hold.
After the announcement, USDSGD fell -0.30% to 1.3475, although it has since recovered to be back trading near 1.3500 at the time of writing.
Turning now to the China A50. JP Morgan this week downgraded China's growth to 8.3% in 2021 and 5.2% in 2022, based on a property sector slowdown and production constraints to meet energy targets. Despite this, the China A50 has made good gains since our last update.
As noted last week, the China A50 tested and held the August 14516 low during the commotion of the Evergrande incident during September, providing preliminary evidence of basing.
The index has since broken above downtrend resistance at 15650, coming from the February 20688 high and horizontal resistance from the September 15715 high. This development indicates that a multi-month correction is complete at the 14,516 low and sets up a test of resistance, formerly support at 16,500/17,000.
We would stay with the positive view unless the China A50 was to fall back below support 15,600.
Source Tradingview. The figures stated areas of October 14th, 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
How to trade with City Index
You can trade easily trade with City Index by using these four easy steps:
Open an account, or log in if you’re already a customer
• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
- Search for the company you want to trade in our award-winning platform
- Choose your position and size, and your stop and limit levels
- Place the trade
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.