Asian markets shrug off fears of Fed hike

Bullish sentiment on STI pushes up stocks of 3 local banks, spills over into penny segment

Asian markets started the week on a high note yesterday, thanks to Friday's strong gains on Wall Street amid expectations that the United States Federal Reserve will not hike the interest rate this week.

All major markets in the region rose yesterday, with Shanghai gaining 1.75 per cent and Hong Kong rising 1.17 per cent. Tokyo put on 1.74 per cent, while Sydney closed up 0.37 per cent.

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

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

This is due to the encouraging backdrop where "the expectation that the Fed will raise the 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 as well. Chinese regulators said over the weekend that there are no plans 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 yesterday, with the three local banks leading the pack. OCBC went up 15 cents or 1.7 per cent to $8.95, DBS rose 14 cents or 0.92 per cent to $15.38 and UOB added 14 cents or 0.75 per cent to $18.79.

The banking plays will not benefit from a delayed US 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 be only one to two Fed hikes in 2016. DBS will be in the best position to leverage when the hike sets in, due to its huge (current and savings accounts) base. "

However, an oil price recovery remains an open question as benchmark Brent futures dipped below US$40 a barrel again yesterday.

Both Sembcorp Marine and Keppel Corp dropped amid the uncertainty. Sembcorp Marine pared 1.5 cents or 0.87 per cent to $1.715, while Keppel Corp ended two cents or 0.33 per cent lower at $6.04.

Golden Agri-Resources was the top loser of the day, down one cent or 2.38 per cent to 41 cents.

The penny stock segment was also rife with activity.

OEL Holdings and IEV Holdings were among the top actives. OEL put on 0.3 cent or 11.11 per cent to three cents on 41.6 million shares traded, and IEV went up 1.7 cents or 17.53 per cent to 11.4 cents on 72.5 million shares traded.

Both companies have been subjected to Singapore Exchange queries due to their unusual volume movements in recent days. OEL and IEV both said they were not aware of any reason for this.

A version of this article appeared in the print edition of The Straits Times on March 15, 2016, with the headline 'Asian markets shrug off fears of Fed hike'. Print Edition | Subscribe