Here's how bad Singapore will be hurt by robust US dollar

Weaker commodity prices loom.

According to Nomura, a strong US$ is not positive for Asian markets in general. Specifically a rising US$ has tended to be negative for the Singapore market historically.

Nomura noted that a broad-based strengthening of the USD in the 2H2013 has been its major view this year.

"We believe that as growth in the US improves and the Federal Reserve starts reducing its purchases of Treasuries, USD should reach the end of its structural depreciation – which has lasted since 2002 – and will enter a period of structural strength," says Nomura.

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However relative to the other emerging markets within ASEAN, Singapore may be seen as more resilient. A key implication of a structurally strong US$ is potentially weaker commodity prices.

A weaker CPO price on the back of a weaker US$ and potentially weaker demand from China would undermine the performance of the plantation stocks listed in Singapore and ASEAN. The commodity supply chain players like Olam, Noble and Wilmar would also be affected by lacklustre commodity prices.

On a more positive note, a weaker oil price could benefit transport companies like SIA, NOL and Comfort Delgro, which have been adversely affected by the firm oil prices over the past few years.