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STI barely moved by China stimulus

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Regional markets close higher on expectation of dovish policies from central banks

Local equities got the week off to a quiet start in a session that saw regional peers lifted by China's stimulus measures and hopes that the US Federal Reserve will lower rates this month.

The Straits Times Index (STI) barely moved, adding just 1.85 points or 0.06 per cent to finish at 3,146.33.

Elsewhere in the Asia-Pacific, Australia, China, Japan and South Korea were higher.

Like the Singapore bourse, Hong Kong was little changed. Markets in the territory remain jittery, even after the much criticised extradition Bill was scrapped.

Malaysia was closed.

The risk-on mood yesterday was driven by the effects of recent stimulus and hopes of further accommodative central bank policies.

In a bid to inject liquidity into an economy already facing the tandem effects of a slowdown and a trade scuffle with Washington, the People's Bank of China cut the reserve ratio requirement for Chinese banks last Friday to its lowest level since 2007.

It is a well-timed move given the disappointing trade figures that followed on Sunday and the latest round of US tariffs in effect since Sept 1.

Judging from August's job data, the US economy could be showing signs of weakening. This further builds the case for a rate cut by the US Federal Reserve.

Markets are already expecting a 25 basis point cut this month.

That said, next week's inflation and consumer spending readings are probably going to determine whether those hopes of a cut become a reality.

In Singapore, the trading volume yesterday was 893.24 million securities.

This is three-quarters the daily average in the first seven months of 2019.

Total turnover was $728.03 million, 69 per cent of the January-to-July daily average.

Across the market, decliners outpaced advancers 192 to 166. The blue-chip index had 12 of the 30 counters in the red.

Yangzijiang Shipbuilding continued its run as the STI's most active counter, closing flat at 98 cents, with 42.6 million shares changing hands.

Its shares have gained 4.3 per cent since it inked new orders for five vessels last week.

Based on market data, institutions were net buyers of the stock last week while their retail counterparts were net sellers, suggesting that the contract wins revived the former's interest in Yangzijiang.

"There is still an overhang caused by Chinese investigations concerning an individual having close links to Yangzijiang, but it is clearly having less of an effect now," a trader noted.

The local banks were mixed. DBS Group Holdings added one cent or 0.04 per cent to $24.77.

United Overseas Bank was four cents or 0.2 per cent higher at $25.54.

But OCBC Bank ended down three cents or 0.3 per cent at $10.82.

With dovishness expected from central banks globally, it is worth pointing out that a lower interest rate environment can negatively impact the net interest margins of banks.

But Singapore Exchange market strategist Geoff Howie noted that the three local banks shares posted a total return of 6.2 per cent in the 2019 year till Sept 6, more than the STI's 2.5 per cent.

Real estate player UOL Group dipped one cent to $7.47 after it launched sales for Avenue South Residence last Friday.

Take-up rates met expectations, analysts said.

Among penny stocks, Tee International shares faced a sell-off, skidding 0.7 cent or 15.2 per cent to 3.9 cents after revealing the appointment of an independent investigator to look into unauthorised transactions totalling $6.55 million made by its subsidiaries to related parties.

Its shares have lost 55 per cent in the last month.

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