Asian markets wait and watch as Fed meet looms, STI ends 5 points up

SINGAPORE - Singapore shares slogged through a quiet session and Asian markets also had a mixed day, as caution again took hold of regional sentiment before the United States Federal Reserve concludes its March meeting.

The benchmark Straits Times Index had a relatively good start but jitters soon set in and sent STI stumbling to a close at 2,844.21, up 4.77 points or 0.17 per cent. Only S$678.6 million worth of shares changed hands across the whole market.

Elsewhere, Shanghai rose 0.21 per cent and Hong Kong was up by 0.15 per cent. Tokyo dropped 0.83 per cent, a day after Bank of Japan's decision to hold back on further easing stirred up money market confusions. Overnight, Dow Jones Industrial Average put on a marginal 0.13 per cent.

An interest rate hike announcement is not expected at the end of the two-day Fed meeting, but market watchers are waiting for signals on US and global growth outlook. Regardless, rate hikes will not be avoidable this year, OCBC analyst Barnabas Gan told the Straits Times.

"(The Fed) may opt to drop their medium dot plot," he said, referring to the Fed's own rate projections. "But even then it doesn't erase the likelihood of rising interest rates. We are expecting two hikes this year."

This means the greenback will gain strength and investors who are looking at gold as a safe-haven asset should think twice.

"Given the stock market volatility there has been a demand for gold. But our view is still bearish, and I'm calling for gold to touch US$1,100 per ounce at the year end," he said. Gold price currently stood at around US$1,230.

Back in the local stock market, 19 of the 30 STI constituents rose Wednesday, led by OCBC which closed up six cents or 0.67 per cent at S$8.95. Its competitors DBS was flat at S$15.37, while United Overseas Bank was up six cents or 0.32 per cent to S$18.82.

Keppel Corp put on five cents or 0.84 per cent to $5.98, following news of its joint venture for Vietnam projects, while Sembcorp Marine was similar flat, closing at S$1.68. In the backdrop, crude oil benchmark Brent stayed below US$39 per barrel.

Outside the STI, M1 also dropped, losing one cent of 0.39 per cent to S$2.58, but Starhub went up one cent or 0.3 per cent to S$3.38.

The heated competition in the telco sector has recently come under spotlight after MyRepublic outlined its data plan in its push to become the fourth operator in Singapore.

CIMB analyst Foong Choong Chen said Singtel, due to its diversified businesses, will be least at risk if a fourth player enters the already crowded market here.

whwong@sph.com.sg