Bulls And Bears

Asian markets rise after Fed hints of rate cuts

Bourses also lifted by likely US-China meeting over trade at G-20 summit

Investors finally got what they were expecting yesterday - a signal from the United States Federal Reserve about impending rate cuts.

Markets were pleased, of course, and registered increases across the region, including in Singapore.

The Straits Times Index (STI) extended gains to rise 26.34 points, or 0.8 per cent, to 3,314.51.

Australia, China, Hong Kong, Japan, Malaysia and South Korea all ended higher as well.

"Markets are now pricing in a very high probability that the Fed will cut rates... on July 31, with a good chance that it will be a 50-basis point cut rather than a 25-basis point cut," said UBS Global Wealth Management regional chief investment officer Kelvin Tay.

Equity markets were also given a lift on the likely meeting between the US and China over trade at the Group of 20 summit next week.

While a deal is unlikely, the fact that a meeting has been pencilled in seemed enough to calm nerves.

Trading here clocked in at 1.56 billion shares worth $1.31 billion, with gainers beating losers 237 to 162. Only four of the STI's 30 components closed in the red.

Financials continued to trend up. DBS Group Holdings closed 1.5 per cent ahead at $25.82, OCBC Bank added 0.5 per cent to $11.24 and United Overseas Bank put on 0.3 per cent to $26.22.

It was UOB's turn yesterday to get an upgrade call to "buy" from OCBC Investment Research. It noted that even after UOB rallied for nine straight days, gaining 9 per cent before yesterday's session, it remains "inexpensive". The broker has a fair-value estimate of $28.90.

Banks took a hit in May and June on trade war concerns, the global growth slowdown and likely cuts in interest rates, which some worried might eat into net interest margins. But the lenders' shares have since reversed course, triggered by attractive valuations after the dip.

Real estate investment trusts (Reits) continued to see interest in the wake of the US Fed talk.

Morgan Stanley noted yesterday that with the exception of industrial Reits, Singapore Reits (S-Reits) posted disappointing results in the first quarter. But "current valuations should hold up on a benign interest rate outlook as well as increased redevelopment potential".

Morgan Stanley has increased its price targets for S-Reits under its coverage by an average of 10 per cent on increases in dividend/share forecasts and the incorporation of better valuations.

Of the eight under the bank's coverage, Ascendas Reit (up 0.3 per cent to $3) remains a top pick as "it is the best proxy for defensive Reits and could benefit from redevelopment projects".

A version of this article appeared in the print edition of The Straits Times on June 21, 2019, with the headline 'Asian markets rise after Fed hints of rate cuts'. Print Edition | Subscribe