Regional markets follow Wall Street rally on US Fed news, STI closes 18 points up

SINGAPORE - Asian markets started the week on a high note, spurred by the strong gain on Wall Street amid the expectations that the United States Federal Reserve will not hike interest rate this week.

All major markets in the region rose on Monday (March 14), with Shanghai gaining 1.75 per cent and Hong Kong up 1.17 per cent. Tokyo put on 1.74 per cent, while Sydney closed up 0.34 per cent.

Singapore's benchmark Straits Times Index (STI) did not miss out the strong run of play, closing up 18.2 points or 0.64 per cent at 2,847.06. Trading volume was strong on Monday with 1.36 billion shares worth 883.2 million changing hands across the whole market.

A 1.28 per cent rise to Dow Jones Industrial Average last Friday gave Asia the leg-up to extend its recent strong form, KGI Fraser Securities analyst He Yuxuan told The Straits Times.

This is due to an accommodative backdrop where "the expectation that the Fed will raise rate in its March meeting this week is rather low, and oil prices are also seen as potentially bottoming out", he said.

There were other positive signs to cheer for. In China, securities market regulator said over the weekend that there is no plan for the government to withdraw its market rescue fund.

In the local market, the bullish sentiment helped push up 19 of the 30 STI constituent stocks, with the three local banks leading the pack.

OCBC went up 15 cents or 1.7 per cent to S$8.95, DBS rose 14 cents or 0.92 per cent to S$15.38, and UOB closed up 14 cents or 0.75 per cent at S$18.79.

The banking plays will not benefit from a delayed rate hike, but better oil prices will be a boon, Mr He said.

"I expect the net interest margins of the banks to stay flat in the first half this year, on the estimate that there will only be one to two Fed hike in 2016. DBS will be in the best position to leverage when the hike sets in, due to its huge CASA (current and savings accounts) base," he added.

"Meanwhile, all three will benefit if the conditions of the oil and gas sector starts looking up, as there will be less concerns around the loan book exposure to bad debt in the sector."

However, whether the oil price recovery is sustainable remains an open question, as crude oil benchmark Brent futures dipped below US$40 (S$54) per barrel again.

Both Sembcorp Marine and Keppel Corp dropped amid the uncertainties. Sembcorp Marine pared 1.5 cents or 0.87 per cent to S$1.715, while Keppel Corp ended 2 cents or 0.33 per cent lower at S$6.04. Golden Agri-Resources was the top loser of the day, down 1 cent or 2.38 per cent to 41 cents.

Outside the STI, the penny stock segment was also rife with activity, as the improved risk appetite pushed up several stocks on the back of punting.

whwong@sph.com.sg