Local shares could not avoid the regional sell-off after the Federal Reserve's hawkish rate announcement in the United States overnight.
Investors in Asia woke up to the surprise that the Fed is eyeing potentially three hikes next year, following the one confirmed yesterday. The previous forecast had flagged only two hikes next year.
These faster-than-expected rate hikes suggest the Fed thinks the US and global economy is on track for a firm recovery, but it can also be disruptive to corporate balance sheets, currencies and commodity prices.
For instance, the US dollar regained its 12-month high of around 1.443 against the Singdollar yesterday, while gold dipped around 1 per cent to US$1,131 per ounce - the lowest since early February.
Against this backdrop, and with weak leads from Wall Street - the Dow Jones Industrial Average dropped 0.6 per cent overnight - investors took their money out of Asian shares. Shanghai was down 0.73 per cent, Hong Kong was off 1.77 per cent and Sydney pared 0.82 per cent. Tokyo was able to end with a 0.1 per cent gain.
The Straits Times Index (STI) here closed down 23.29 points, or 0.79 per cent, at 2,930.77. The local benchmark started half a per cent down in early morning trade and dropped to as low as 2,922, but the afternoon session was mostly flat.
The drop was hardly anything to panic over, remisier Alvin Yong said. "It's actually more like a technical correction, if you consider the context that the STI has joined the global markets in the multi-week Trump rally."
The STI was still up 4.8 per cent compared with a month ago. With the last major market event this year over, there is hope among traders that the STI can wrap up 2016 at 3,000. "That will mean Singapore ends the year in a bull market, which some define as 20 per cent above the previous low," Mr Yong said.
Still, investors were not in the mood to bet yesterday, with only one gainer in the 30 STI component stocks: Thai Beverage added 2.5 cents, or 2.91 per cent, to 88.5 cents, with 61.8 million traded shares.
StarHub led the 27 STI losers, dropping nine cents, or 3.1 per cent, to $2.81, amid concerns of competition as the fourth telco was unveiled on Wednesday. Singtel was off three cents, or 0.8 per cent, to $3.73.
Genting Singapore fell 2.5 cents, or 2.54 per cent, to 96 cents, despite news that the Japanese Parliament has legalised casino gambling. Wilmar International dipped nine cents, or 2.43 per cent, to $3.61.
In the offshore and marine sector, Keppel Corp ended 13 cents, or 2.09 per cent, down at $6.09, while Sembcorp Marine, which is outside the STI, dropped three cents, or 2.01 per cent, to $1.465, as Brent crude futures dropped below US$55.
Vard Holdings, also among the companies affected by oil prices, was flat at 24 cents, despite news the buyout offer by its parent Fincantieri has received KPMG's backing.
