Bulls And Bears

Market muted ahead of US fed meeting

Traders' attention will also be on US-China ties for a while, say analysts

Geopolitical uncertainty and an anticipation of what guidance might come next week regarding United States interest rates kept the local market subdued yesterday.

The benchmark Straits Times Index (STI) fell 7.49 points, or 0.21 per cent, to 3,529.27 and was down 1.1 per cent for the week. About 1.6 billion shares worth $1.1 billion were traded, with losers outpacing gainers 222 to 164.

Most Asian stock markets - except Singapore, Australia and India - rose, despite Wall Street's decline overnight.

Mr Eli Lee, head of investment strategy at the Bank of Singapore, said this could be due to reports of a US-China trade breakthrough, with China offering to cut its annual trade surplus by US$200 billion (S$268 billion). But he added: "Denials by a Chinese official later in the day, however, rapidly tempered enthusiasm and led to the European markets opening lower. The rising euro also weighed on European stocks."

"While investor sentiments were dampened, the retreat was made in an orderly fashion - and safe-haven gold held steady around the US$1,290 level."

Local real-estate investment trusts (S-Reits) fell after ESR-Reit and Viva Industrial Trust announced a merger, marking it a first in S-Reit history and potentially paving the road for similar deals.

That said, next week's release of the US Federal Reserve's minutes may be keeping their prices under pressure as the market expects more interest rate increases this year.

City Developments continued its losing streak, falling for the sixth straight day, this time by 11 cents to $11.78. The developer has lost 6.1 per cent since posting a 16 per cent drop in first-quarter earnings on May 11.

Shipbuilder Yangzijiang is another counter that has been on a downward spiral, falling for the fifth straight session yesterday. It lost five cents or 4.5 per cent to $1.06 and is down 11 per cent this week.

IG market strategist Pan Jingyi noted that bond yields and crude prices continued their climb as geopolitical concerns linger, including mixed messages regarding US-China talks.

Analysts expect the lack of clarity over US and China's relations will be the key factor occupying the market's attention for a while.

US President Donald Trump seems to be casting doubts over a trade negotiation success, but there are unconfirmed reports suggesting that China has offered a huge cut in its US trade deficit.

A version of this article appeared in the print edition of The Straits Times on May 19, 2018, with the headline 'Market muted ahead of US fed meeting'. Print Edition | Subscribe