STI ends flat after Fed signals scaling back of policy support

News that the United States Federal Reserve may scale back policy support as the US economy recovers from the Covid-19 pandemic led to a wary trading session in Singapore yesterday, as investors adopted a risk-off sentiment.

Fed chairman Jerome Powell said on Wednesday that officials had started a discussion about scaling back bond purchases. They were also leaning towards two interest rate hikes by the end of 2023, based on median estimates.

"The Fed may have delivered a more hawkish message for markets than many would have expected," said IG market strategist Yeap Jun Rong.

"Markets have been riding on the Fed's 'lower-for-longer' accommodative stance, with the recent Fed meeting outcome seemingly overturning this narrative."

The benchmark Straits Times Index ended the day flat, down a marginal 0.04 per cent to 3,138.31. Across the broader market, decliners outpaced advancers 270 to 210, after 1.68 billion securities worth $1.22 billion changed hands.

Regional markets mostly ended the day in the red as investor optimism waned. The Nikkei 225 fell 0.9 per cent, the Kospi lost 0.4 per cent, while the KLCI shed 0.5 per cent. The Hang Seng Index, however, rose 0.4 per cent.

In Singapore, Jardine Matheson Holdings was the top advancer of the day. The counter closed up 0.6 per cent at US$62.84. Another member of the Jardine group of companies, Jardine Cycle and Carriage, was also among the top gainers, rising 1.2 per cent to $21.85.

Banks were among the notable decliners as the threat of higher interest rates loomed over investors. Great Eastern was the biggest loser, falling 0.6 per cent to $22.56.

The trio of local lenders also ended in the red. UOB fell 0.4 per cent to $25.94, OCBC Bank declined 0.7 per cent to $12.12, while DBS receded 0.1 per cent to $29.90.