The US government's QE2 (a.k.a. Quantitative Easing 2) is ending this week and I believe this is the main impact that caused the US$ to rise (against S$) and the recent stock market woes.
When the QE2 was first launched, it resulted in a lot of liquidity in the market. Big funds will use the money, convert to Asian currencies, and trade for higher (or some would say safer) returns in the Asian stock markets. Afterall, Asian countries should have better growth prospect compared to the US between end last year till now. This means that US$ would have weakened and Asian stock market would have enjoyed some form of rallies.
When QE2 is ending, the reverse will hold true. Big funds will dumped their Asian stocks and convert the proceeds back to US$. Thus this few days we can observe big volume transactions in some stock counters, while the US$ continues to strengthen. One example that I can point out is SingTel shares. From yesterday I have observed transactions in sizes over 1,000 lots, i.e. about S$3million plus per transactions. There were a number of these transactions for both yesterday and this morning. See the pic below for transaction sizes at 10:03:28am and 10:02:33am.
I guess this period has been great for the bears. Let's see what happens after QE2 ends on 30 June 2011.
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