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STI falls 0.3% as Fed raises rates

Losers outnumber gainers on local bourse; other Asian markets also suffer losses

Singapore stocks tracked Wall Street losses yesterday after the US Federal Reserve hiked interest rates for the fourth time this year.

The Straits Times Index was down as much as 0.56 per cent or 16.98 points at 3,041.67 in the morning but pared losses later in the day. It finished 0.3 per cent lower, or 8.03 points, to 3,050.62.

In a widely anticipated move, the US central bank raised the target range for its benchmark funds rate from 2.25 per cent to 2.5 per cent. However, investors had hoped for a softer approach amid a host of issues - such as US-China trade spat - weighing on global growth prospects.

The Fed also trimmed the number of rate hikes projected next year from three to two, but markets had been priced for just one hike next year.

At a press conference after the decision on Wednesday, Fed chair Jerome Powell also stressed that policy was not on a preset course.

He said: "There's significant uncertainty about both the path and the ultimate destination of any further rate increases."

Mr Ray Attrill, strategist at National Australia Bank, told Bloomberg the post-Fed meeting sentiment was "a bit surprising" given the bank had stressed a "gradual" pace of rate hikes next year.

"The expectation here was that all reference to 'gradual' could be dropped," he said.

For equity markets charting the route ahead, IG strategist Pan Jingyi said: "Not only did we not get the Santa rally that was hoped for, it does look like one has to grow more accustomed to the market joining President Trump in viewing the Fed as an 'enemy of the people'."

She suggested looking to breakthroughs in politics in the form of a shutdown aversion in the US to potentially help the likes of the S&P 500 index weather the storm.

The local bourse saw losers outnumber gainers 281 to 125, with about 1.21 billion shares worth $869.8 million changing hands.

Actively traded counters included Ezion Holdings, which fell 6.38 per cent to $0.044 with 46.6 million shares changing hands, and Golden Agri-Resources, down 2 per cent to 24.5 cents with 36.4 million shares traded.

Banks weighed on the index with losses, as DBS Bank dipped 0.72 per cent to $23.40, United Overseas Bank lost 0.21 per cent to $24.31, and OCBC Bank pared 0.54 per cent to $11.08.

Singapore Reits, perceived as defensive plays by local equity analysts, also ended the day firmly in the red, with rising interest rates acting as dampeners.

Stocks favoured by analysts pointed lower - Mapletree North Asia Commercial Trust closed 0.86 per cent lower at $1.15; Frasers Centrepoint Trust declined 0.46 per cent to $2.17; Keppel DC Reit closed flat at $1.38.

The standout was Frasers Logistics & Industrial Trust, which added 0.95 per cent to $1.06. Since posting higher distribution per unit for Q4 in November, the stock has risen in value.

Spillover from the rate hike weighed on Asian stocks too, with the Sydney and Tokyo benchmarks slumping to new lows.

The Australian ASX 200 index dropped 1.3 per cent to end the day at 5,505.80, its lowest in two years. Similarly, the Nikkei index sank to a 15-month low after closing down 2.84 per cent to finish at 20,392.58.

China's central bank decided to keep short-term borrowing rates unchanged but failed to lift spirits. Shanghai closed 0.52 per cent lower while Hong Kong fell 0.94 per cent at the closing bell.

For full listings of SGX prices, go to http://btd.sg/BTmkts

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