Global markets have been sold down lately due to the middle-east situation with the latest Libya with a possibility of developing into a civil war case. Unlike the case of Egypt whereby issue was resolved once the President agreed to step down. Libya's leader Qaddafi is determined to stop the riot even with the use of forces and he will not step down to resolve the issue. Unlike Egypt, Libya is a oil-riched country and the unrest has brought concern on the global production of crude oil which will affect the global economy. Potentially the unrest in Libya could further spread to other oil producing countries in the middle east and that will have further impact on global economy.
US was able to intervene to settle the Egypt issue but not the case of Libya as Libya is unfriendly towards the US politically and that make the unrest more difficult to resolve.
The middle east saga if cannot be contained might bring the existing global economy from recovery mode back to recession ( with case of wars been developed ).
On the brighten side, China recent inflation data showing sign of cooling down after several rounds of cooling measures being introduced. China need to bring the inflation down to controllable level and with that perhaps another 1 or 2 more rounds of rate hike or more hike in bank reserve ratio is possible within the 1H2011. China being the world #2 economy country if is able to bring inflation under control, should re-focus on its economic growth again and that would help the recovery of global economy. China market since after CNY was on a rally and managed to reverse a downtrend established since last year and that could signal something important coupling with the recent taming inflation data. Stock market as a forwards indicator of economy could signal that China could be able to bring inflation under control and re-focus back on economy growth 6 months later.
Global stock markets would have the above 2 opposite issue to track for the time being.
Technically speaking, STI 2,400 is the bear market lines and 3,460 is the bull market lines. In between STI is considered consolidation market. A drop below 2,400 would indicate Singapore economy back to recession. A break of 3,460 would indicate Singapore economy are fully back to the 2007 pre-crisis days.
In between 2,700 is another level that worth watching. This level indicates a "technical recession" level. A drop to 2,700 could mean Singapore is experiencing technical recession. Technical recession means contraction of economy for 2 consecutive quarters ( the real economy still can be a positive figure though ).
With middle-east unrest which could indirectly affect Singapore economy, the scenario of technical recession is possible which means downside for STI could go to 2,700.
On the other hands, if China is able to bring inflation under control and re-focus back to economy growth, leading Asia countries, the upside of STI hitting 3,460 is also possible.
At the moment, still unclear of which but biased towards the downside more.
