STI falls in absence of post-election rally

Investors focused on Fed rate decision, fear China in for harder-than-expected landing

Punters hoping for a post-election rally were sadly disappointed yesterday when renewed worries about China's economy and uncertainty over United States interest rates dampened sentiment.

The benchmark Straits Times Index slipped 0.5 per cent at the opening bell yesterday and mostly stayed in negative territory, closing down 16.56 points, or 0.6 per cent, to 2,871.47.

The key losers included DBS Bank, which lost 0.6 per cent, or 10 cents, to $17.62; Noble Group, down 6.9 per cent, or 3.5 cents, to 47.5 cents; and City Developments, off 2 per cent, or 17 cents, to $8.18.

Penny stocks dominated the thin trading day.

SinoCloud Group plunged 33.3 per cent, or 0.1 cent, to 0.2 cent, with 133.6 million shares traded. Ezra Holdings slipped 3.2 per cent, or 0.4 cent, to 12.3 cents, with 85.2 million shares traded. Airport solutions provider Stratech Group plunged 14.5 per cent, or 0.8 cent, to 4.7 cents, with 53.4 million shares traded.

The lack of a general election rally did not surprise remisier Desmond Leong. "If before the general election, there was no rally, then after the general election, there is also no rally," he said.

"Most people expected the PAP to win. The question is by what margin and how many seats the opposition would get. The stock market will react only if there is a real possibility of political instability, which there isn't... Markets tend to be globally driven, not by local politics."

Investors instead were focused on this week's key rate decision from the US Federal Reserve on Friday morning, Singapore time.

The decision is seen as being too close to call, with economists and pundits split down the middle on whether the Fed will raise rates.

Citi Research said yesterday that volatility is expected to stay high across asset classes as investors await the decision. "Low market expectations of a September Fed lift- off has helped risk assets over the last few sessions. But it is unlikely that market positioning will turn significantly bullish ahead of the event."

Remisier Alvin Yong said: "Participants are mentally prepared for a rate hike this week, so if it doesn't happen, it's a bonus. If it happens, the market may take it in stride."

Meanwhile, data out of China showed that fixed-asset investment rose at the slowest pace in 15 years and industrial production grew 6.1 per cent year on year last month, missing analysts' estimate of 6.5 per cent. Last month's retail sales were better than projected.

Despite the soft economic data reinforcing fears that China is in for a harder-than-expected landing, traders say there are hopes Beijing will implement further stimulus measures.

IG Market analyst Bernard Aw said: "But more monetary policy easing is likely to be targeted at keeping liquidity conditions at a comfortable level, rather than providing more direct impetus to economic growth."

A version of this article appeared in the print edition of The Straits Times on September 15, 2015, with the headline 'STI falls in absence of post-election rally'. Print Edition | Subscribe