Singapore shares drop with Fed divided on inflation risks, timing of rate rises

Pedestrians using an escalator that runs past an electronic screen and ticker board that indicates stock figures at the Singapore Exchange.
Pedestrians using an escalator that runs past an electronic screen and ticker board that indicates stock figures at the Singapore Exchange.PHOTO: ST FILE

SINGAPORE - A sell-off on DBS Group and OCBC Group sent Singapore shares lower on Thursday (July 6) after minutes from the US Federal Reserve's most recent meeting showed that officials were divided on the US inflation outlook as well as the pace of future US interest rate increases.

Geopolitical risk remains on investors' minds as North Korea's test of an intercontinental ballistic missile capable of striking the US mainland sparked an emergency meeting at the United Nations Security Council.

As at 1.55pm, the Straits Times Index was down 0.32 per cent, or 10.35 points, to 3,238.36. DBS fell 1.28 per cent, or 27 cents, to S$20.83; OCBC shed 1 per cent, or 11 cents, to S$10.72. Golden Agri lost 1.3 per cent, or 0.5 cent, to 37.5 cents; SPH was down 0.9 per cent, or three cents, to S$3.15.

The Federal Open Market Committee's June meeting minutes released on Wednesday showed that several Fed officials had noted their concern over the impact of interest rate hikes on the markets. Officials were also divided on how to approach policy strategy at a time of low inflation.

"With the mixed tone from the minutes and the essential delay to the announcement of balance-sheet reduction timing, there is no surprise why we are seeing the muted reaction," said IG Asia market strategist Jingyi Pan. "Nevertheless, the Fed's rhetoric still points towards confidence in economic conditions."

With some Fed members suggesting starting balance sheet reduction in September and others sounding less committal, a formal announcement on the unwind may not come until the September meeting, National Australia Bank Head of FX Strategy Ray Attrill told CNBC. The Fed, however, was expected to start no later than October, Mr Attrill said, adding he expected that a further rise in the Fed funds rate will come in December.

Investors took profit on bank counters and bought into property stocks, a remisier said. City Developments jumped 1.5 per cent, or 16 cents, to S$10.83. Yanlord Land Group rose to S$1.78 before slipping to S$1.765.

Meanwhile, local tech manufacturing stocks got a boost from a 0.7 per cent jump overnight in the tech-heavy Nasdaq Composite.

Venture Corp rose 0.4 per cent, or five cents, to S$11.88. AEM Holdings jumped 5.9 per cent, or 13 cents, to S$2.33; Sunningdale Tech climbed 6.3 per cent, or 11 cents, to S$1.87.