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UPBEAT remarks from the United States Federal Reserve were not enough to lift the Singapore bourse yesterday.
Local investors were unconvinced of the prospects for economic growth in the second half of the year, especially given the release of figures which showed that industrial output last month shrank 12.8 per cent year-on-year.
The Fed held rates steady for the first time since September last year, when it started cutting rates to spur growth. Its latest statement suggested that risks to economic growth appeared to have diminished.
The Straits Times Index (STI) dipped 5.67 points to close at 2,980.95 yesterday. It followed the trend of the Dow Jones Industrial Average, which ended only 4.4 points higher at 11,811.83.
One dealer said the outlook for stocks 'remains mixed'.
CIMB-GK economist Song Seng Wun expects some lift to the stock market from the Fed's fairly upbeat comments.
He said that the US first-quarter numbers seemed strong, and the second quarter would also be boosted by rebate cheques designed to lift the economy.
'All this should be supportive of equities,' he said. However, he added that 'on the ground, the picture is not so convincing'.
In general, US economic numbers look to be trending towards the negative side, such as jobs creation, unemployment and inflation. The Fed also said 'labour markets have softened further and financial markets remain under considerable stress'.
Mr Song added that there were concerns over corporate growth prospects. 'Will companies be able to pass the cost increases on to the consumer?' If input prices rise and margins get squeezed, this will spell bad news for equities.
Coupled with continuing worries over oil and commodity prices, the market is unlikely to recover much spring in its step soon.
However, all the nervousness notwithstanding, in the next couple of days, there could be a short-term bounce in the STI stocks at least, some observers said.
With June 30 approaching, fund managers usually try to 'window dress' to present good figures before closing their books.
Regionally, markets ended weaker on inflation fears as well as concerns that the European Central Bank may raise rates next week.
Although oil price worries still take centre stage, they fell nearly 2 per cent to US$134.55 a barrel after government data showed a surprise rise in stocks.
This led to some selling down of oil stocks on the regional bourses.
The Nikkei ended 0.05 per cent down at 13,822.32, while the Hang Seng Index was 0.79 per cent weaker. Even the Shanghai Composite, which had been resisting the falls seen by its Asian rivals over the previous two days, also dropped by 0.11 per cent.
But some regional markets rose, such as Australia's ASX 200 index.
On the Singapore market, property stocks were positive, possibly because Citigroup said that reports of a glut of properties in the next couple of years were exaggerated.
Hongkong Land rose four US cents to US$4.16, Fraser & Neave rose six cents to $4.59, and City Developments surged 36 cents to $11.20.
The broader market lost heart. The 351 losers yesterday easily outnumbered the 222 on Wednesday, and the 207 gainers were down from 289.
The top actives were all in a sea of red. Live seafood provider Oceanus lost three cents to close at 36.5 cents on a volume of 46.6 million shares. China Hongxing Sports fell a cent to 46.5 cents with 33.4 million shares traded.
Oil-related stocks took a hit as well. Palm oil player Golden Agri-Resources was three cents weaker at 89 cents, its lowest since May 5. Rival Wilmar International also lost three cents to $5.07, and rig-builder Keppel Corp lost 22 cents to close at $10.88, its lowest since May 9.
Volumes improved with 1.11 billion shares traded, up from the 1.02 billion on Wednesday
sushyan@sph.com.sg
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