Midday market report: Singapore shares rally on dovish Fed rate hike signals

A man taking the escalotor down at the SGX Centre.
A man taking the escalotor down at the SGX Centre.PHOTO: ST FILE

SINGAPORE - Singapore shares rallied in line with the rest of Asia following Wall Street's record high close after Fed chair Janet Yellen expressed confidence in the American economy while signalling monetary tightening will be gradual.

At 12 noon on Thursday (July 13), the Straits Times Index was up 0.59 per cent or 18.95 points to 3,227.86.

The market was powered by Jardine Matheson Holdings, the banks and property counters City Developments and UOL Group. JMH was up 1.8 per cent or US$1.11 to US$63.88.

DBS Group was up 1.3 per cent or 27 cents to S$20.87, OCBC Group was up 0.3 per cent or three cents to S$10.86, UOB was up 1.3 per cent or 31 cents to S$23.56. City Developments jumped 1.2 per cent or 13 cents to S$10.77; UOL gained 0.9 per cent or seven cents to S$7.53.

"The Fed appears to continue to adopt a moderate accomodative monetary policy, which could mean they may be compelled to slow the pace of rate hikes down the road," CMC Markets analyst Margaret Yang.

In prepared remarks to Congress on Tuesday, Yellen said US interest rates are close to a "neutral" level and not in need of a significant move higher. The neutral level is the point where the Fed's benchmark rate is neither accelerating nor restraining the economy.

Yellen conceded that the Fed still likely will need to implement "gradual rate hikes" over "the next few years," but markets took her statement to mean that US central bank position could be more dovish than anticipated.

She also maintained that the Fed will start to reduce its massive US$4.5 trillion balance sheet later this year, but gave no new insights on a start date.

Across Asia, markets rallied. Hong Kong jumped 1.1 per cent, Shanghai was up 0.44 per cent and Thailand rose 0.37 per cent.

"The sustainability of this rally will depend on the upcoming earnings season as the market shifts its focus to the companies' mid-year reports," Ms Yang said. Big US banks including JP Morgan, Citigroup and Wells Fargo are among the first to announce earnings at end of this week.

In Singapore, Singapore Press Holdings and Keppel Corp will kick off the start of the earning season on Friday.

Meanwhile, investors are eyeing more privatization deals. Mainboard-listed Global Logistic Properties (GLP), which has put itself up for sale, halted the trading of its shares on Thursday pending an announcement.

Singapore warehouse operator GLP, which is pursuing a sale, has picked a Chinese bidder consortium for final deal talks, according to Bloomberg. The investor group, fronted by GLP chief executive Ming Mei, edged out a rival consortium led by Warburg Pincus, the report said. The Chinese consortium, which includes private equity firms Hillhouse Capital Management and Hopu Investment Management, will now negotiate definitive terms for the transaction, Bloomberg said.