Bank of Japan rate decision spurs sentiment, STI jumps 67 points

The Straits Times Index rallied 2.6 per cent to 2,629.11, and is up 2 per cent for the week.
The Straits Times Index rallied 2.6 per cent to 2,629.11, and is up 2 per cent for the week.PHOTO: REUTERS

SINGAPORE - A surprise move by the Bank of Japan to cut a benchmark interest rate below zero to revive the Japanese economy sparked what traders hope is the beginning of a hoped-for Chinese New Year rally for Singapore shares after the year's brutal start.

The Straits Times Index rallied a whopping 2.6 per cent or 66.66 points to 2,629.11, and is up 2 per cent for the week.

Lifting the index are gains in banking counters DBS, which jumped 3.8 per cent or 52 cents to S$14.06, OCBC, which rose 3.8 per cent or 29 cents to S$7.92 and UOB, which gained nearly 3 per cent or 52 cents to S$18.09.

"This represents a beacon of hope for stocks. Most of us were surprised because we were expecting the BOJ to do nothing," remisier Alvin Yong said.

Market confidence is quite strong for a Friday because that is typically when traders close off positions ahead of the weekend, he said.

"But the strong closing of the STI heavyweights points to traders' confidence in holding their positions over the weekend," he added.

Bank of Singapore chief economist Richard Jerram said the United States Federal Reserve has implied that it could delay policy tightening, but left open the door to raise rates in March if conditions improve.

"The probability of a rate hike in March has probably dropped from 75 per cent after the December meeting to about 40 per cent today, but the Fed is keeping its options open," he said.

Analysts say the BOJ's move could make it even harder for the Fed to raise interest rates four times this year, as originally envisaged by its policy board.

Noble Group was again the most hotly traded stock after it secured shareholders' approval yesterday to sell its 49 per cent stake in Noble Agri to Cofco. The commodity trader surged nearly 15 per cent or 4 cents to 31 cents, with 92.8 million shares traded.

gleong@sph.com.sg