Prices of private residential properties in Singapore gained 1% in Q2 versus the previous quarter. This is slightly higher than the earlier flash estimate which called a 0.8% rise. This seems to agree with the latest CPI data, which showed that Housing Market remains elevated despite a lower than expected CPI growth. However, as 83% of Singapore resident population stays in Government public housing, it is unlikely that your average Singaporean is going to feel the pain of this increase in price. Nonetheless, there is still going to have some spillover impact to prices of public housing, which is freely floated by market and not controlled. It is possible that the increase in prices of private housing will drive demand for these public housing, and thus pushing public housing prices higher. But this increase is going to be so insignificant that MAS’s alarm bells will be likely to remain mute.
What this means in theory is that MAS should still be able to maintain current SGD NEER curve, as all the inflation parameters remain mostly the same, in fact leaning lower considering that headline CPI data is below expectations. Market begs to differ though, thinking that MAS will need to beef up SGD in light of this higher than expected private housing growth. If the above analysis is correct, then perhaps this sharp movement lower can be interpreted as an overreaction, suggesting that sentiment is bearish on USD/SGD, with speculators finding any excuse to short USD/SGD. Should MAS choose to keep SGD curve the same in the upcoming October monetary policy decision, we could easily see USD/SGD reversing all the losses especially if prices maintain below 1.264.
From a technical perspective, we can already tell that price is bearish without invoking any fundamental knowledge. Price hit 1.264 support yesterday following a late night capitulation of USD, with the early Asian trade rebound unable to breach the 1.266 resistance and confluence with Senkou Span B. Furthermore, forward Kumo is showing a bearish Kumo Twist with a bearish Kumo breakout. However, stochastic readings are currently close to the oversold region, which suggest that price may find it hard to break 1.26 based on this short-term bearish momentum alone without any significant pullback in the interim.