STI continues losing streak after US Fed signals fewer rate cuts

SINGAPORE – The carnage on Wall Street overnight following downbeat forecasts on US rate cuts sent shares sliding across the region on Dec 19.

The Straits Times Index (STI) escaped relatively lightly, falling just 0.4 per cent or 16.74 points to 3,762.88, but losers easily outpaced gainers 340 to 176 on trade of 1.2 billion securities worth $1.3 billion.

The sell-off was sparked by falls on Wall Street, with the Dow Jones Industrial Average plunging more than 1,100 points or 2.6 per cent – its 10th consecutive negative session and longest losing streak in five decades. The Nasdaq dropped 3.6 per cent, while the S&P 500 lost 3 per cent.

Major regional indexes followed suit. The Kospi fell 2 per cent, the Nikkei 225 closed 0.7 per cent lower, Hong Kong’s Hang Seng declined 0.6 per cent and Australian shares dived 1.7 per cent.

Investors were uneasy at signals by the US Federal Reserve that there would be only two rate cuts in 2025, not the four initially forecast.

But analysts remained optimistic on the outlook for Singapore and Asia markets.

RHB noted before the Fed decision: “Although (falling rates) should ideally be negative for banks – as we expect global and Singapore economic growth to remain positive – the impact... should be manageable for local banks.”

The banks here were mixed: DBS was up 0.07 per cent to $43.40; UOB added 0.3 per cent to $36.54; but OCBC fell 0.9 per cent to $16.68.

The STI’s top gainer was Yangzijiang Shipbuilding, rising 2.9 per cent to $2.89, while the biggest loser was CapitaLand Investment, down 1.9 per cent at $2.56.

Singapore real estate investment trusts (Reits) fell sharply despite the US rate cut. Mapletree Industrial Trust, Frasers Hospitality Trust and Acrophyte Hospitality Trust were among the biggest decliners, falling between 1.8 and 2 per cent.

RHB said investors should gradually build positions in the Reits sector as interest rates are expected to eventually decline. THE BUSINESS TIMES