Singapore inflation likely eased slightly in October

SINGAPORE - Singapore's inflation probably slowed slightly in October as the cost of housing rose at a slower pace, a Reuters poll showed, indicating rising prices will remain a challenge for policymakers even if the economy slips into a recession this quarter.

According to the median forecast of 14 economists, Singapore's consumer price index (CPI) likely rose by 4.5 per cent in October from a year ago, slightly below September's 4.7 per cent pace but well above historical levels of 2-3 per cent.

Core inflation, which excludes the cost of cars and housing as these are more influenced by government policy, probably edged down to 2.3 per cent year-on-year from September's 2.4 per cent.

Singapore has been suffering from higher-than-usual inflation over the past two years, mainly due to a spike in housing rents and car prices even as the economy slows.

A tight job market resulting from measures to make it harder for firms to hire low-cost workers from abroad also contributed to inflation by pushing up the cost of services such as healthcare and cleaning services.

Singapore's economy contracted by 5.9 per cent in the third quarter from April-June on an annualised and seasonally adjusted rate, and banks such as Citigroup said the economy could contract again this quarter amid continued poor demand for its exports, pushing the small city-state into recession.

According to the central bank, Singapore's headline inflation is likely to come in slightly above 4.5 per cent this year before slowing to 3.5 to 4.5 per cent next year, as rising rents and car prices continue to push up the cost of living.

For the first nine months of this year, inflation averaged 4.8 per cent, stronger than most Asian countries.

China, for instance, earlier this month reported October inflation of just 1.7 per cent, the slowest pace in nearly three years.

UOB cuts Keppel target price

UOB Kay Hian cut its target price on Keppel Corp Ltd , the world's largest rigbuilder, to $12.30 from $12.80, but kept its 'buy' rating, citing lower operating margin assumptions.

By 0208 GMT, Keppel shares were up 0.1 per cent at $10.56, and have risen 13.5 per cent since the start of the year, compared with the Straits Times Index's 12.9 per cent rise.

UOB lowered its offshore and marine margin estimates for Keppel in 2013 and 2014, which resulted in a 4 per cent lower net profit forecast for next year.

However, higher infrastructure earnings will help to support earnings in 2014.

Higher operating margins seen from 2010 to mid 2012 were mainly due to lucrative contracts secured during the boom years of 2007-2008, UOB said.

"We believe Keppel stands a good chance of registering higher offshore and marine margins than Sembcorp Marine as it is building semi-submersible rigs for Brazil," which are not new to the company, the brokerage said.