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Banks among top gainers on STI

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Strong start in Asian markets proved short-lived due to G-20 summit jitters

Powered by dovish Fed comments overnight, Asian markets kicked off yesterday with strong starts but gave up most gains later in the day as G-20 jitters took hold.

Early movers in the region, Sydney and Tokyo had seen healthy gains of about 0.9 per cent. Singapore stocks climbed strongly before lunchtime, with the Straits Times Index (STI) punching 1.1 per cent to record its highest for the day.

But the rally proved short-lived as the STI declined in the afternoon, finishing just 0.5 per cent higher at 3,109.44.

Gainers outnumbered losers 235 to 167, with about 2.2 billion shares worth $1.21 billion in total changing hands. Local banks were among the bourse's top gainers. DBS Bank was up 1.3 per cent at $24.18, OCBC Bank rose 0.81 per cent to $11.24 while United Overseas Bank gained 1.17 per cent to end at $25.11.

Real estate investment trusts (Reits) also rallied, posting gains above 1 per cent.

Parkway Life Reit kept its early momentum, adding 2.67 per cent to finish at $2.69 - as did Mapletree Logistics Trust, up 1.61 per cent at $1.26, and Suntec Reit, which ended 1.7 per cent higher at $1.80.

The Singapore Exchange's My Gateway reported this week that Mapletree Reits, which include Mapletree Logistics Trust, are among the most defensive stocks as their annualised total returns since their initial public offerings between 2005 and 2013 hit 13.3 per cent.

Overnight, US equities registered their biggest intraday rally since March, following US Federal Reserve chair Jerome Powell's dovish speech last night.

He said current interest rates were "just below neutral", inducing market participants to pare down expectations for further rate rises going into the next year, although a December hike is still likely to take place.

Concerns over higher US interest rates have been a key overhang in markets.

However, markets may have misinterpreted the Fed's message and focused only on a portion of Mr Powell's remarks, DBS Group Research strategists said in a report. DBS' Eugene Leow and Philip Wee said "other parts of the message acknowledged that data dependence will be more important going forward" and said if US data such as labour and consumer prices hold up as expected, the Fed should be able to deliver "several more hikes in 2019".

With the Fed out of the picture for now, markets have to contend with the G-20 summit next, viewed as an opportunity for China and US to break a negative spiral in financial markets.

CMC analyst Margaret Yang said given this is a "delicately prepared, high stakes meeting between the two countries' top leaders, any negative surprise like what we saw in the previous Apec summit is unlikely to repeat in Buenos Aires".

However, she thinks that markets have not fully priced in the possibility of a breakdown in talks and further tariffs on all the remaining Chinese goods. Hence, stock markets will take a hit if talks break down and result in a full-tariff scenario.

As for the Singapore equity market, Ms Yang said downside is protected by relatively low valuations from a historical perspective, although upside is capped by softer earnings growth and trade uncertainties.

The euro rebounded 0.1 per cent against the greenback to 1.1372, its strongest in a week.

Gold rose on the back of the weaker US dollar, rising 0.4 per cent to US$1,226.19 (S$1,680) an ounce, the highest in a week.

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BUSINESS & FINANCE