Singapore stocks down but Singdollar up after dovish Fed signal on US interest rates

A positive lead from Wall Street after the US Federal Reserve said it plans to raise interest rates even more slowly than previously predicted failed to lift Singapore shares.
A positive lead from Wall Street after the US Federal Reserve said it plans to raise interest rates even more slowly than previously predicted failed to lift Singapore shares.PHOTO: REUTERS

SINGAPORE - A positive lead from Wall Street after the US Federal Reserve said it plans to raise interest rates even more slowly than previously predicted, failed to lift Singapore shares, which is back to flirting with the 3,300 support after sinking as much as 0.7 per cent on Thursday on profit taking.

As at 1.14 pm, the benchmark Straits Times Index fell 0.63 per cent or 20.87 to 3,305.04. With investors still leery on the Greek debt crisis, the STI is expected to range-trade between 3,300 to 3,350 as investors await the outcome of a meeting on Thursday by Euro-area finance ministers amid a continued deadlock over aid for Greece.

Most Asian currencies firmed against the greenback, which weakened after the Fed cut its outlook for interest rates amid fragile economic conditions despite a slight pickup.

As at 1.12 pm, the best gainers are the Malaysian ringgit, which firmed sharply to 3.7190 from 3.7573 Wednesday on steady oil prices. The Singdollar also firmed against the greenback to 1.3360 from 1.3479, and was mostly flat against the ringgit to 2.7869 from 2.7882 on Wednesday.

New forecasts from the Fed's policy-setting committee implied two quarter-point rate rises this year but a shallower pace of increases in 2016. Fed chair Janet Yellen stressed that the date of the first rate increase is less important than the trajectory of subsequent ones.

She said tightening would be "gradual," and that the Fed wouldn't follow a "mechanical" formula. But she emphasized that even after rate hikes began, borrowing costs would remain low for years.

"We now expect the first Fed rate hike to take place in the 16-17 September 2015 FOMC but we revised lower the rate trajectory, expecting the FFTR to reach 0.75 per cent by end 2015, and 1.75 per cent by end 2016. That said, we fear that re-emergence of US political brinkmanship in late 2015 could complicate Fed monetary policy decision making," according to UOB Global Economics & Markets Research.

Elsewhere in Asia, Shanghai sank 0.2 per cent, Hong Kong fell 0.6 per cent, Japan shed 0.9 per cent, while Korea jumped 0.6 per cent.

Here in Singapore, Noble Group shares sank 2.1 per cent or 1.5 cents to 70 cents as skittish investors bailed out despite the company's fourth share buyback on Wednesday.

"The share buybacks are a temporary measure to shore up prices," IG market strategist Bernard Aw said.

The commodities trader, which said it bought another 40 million shares at 71.38 cents, so far purchased about 103 million shares, or 1.5 per cent of the total it intends to buy back. But the upside is capped by worries over downgrades by Goldman, and reports that some banks are looking to reduce their exposure to the firm. Noble said Wednesday that its core shareholders and bankers have been satisfied by its defence.