STI loses most of early gains by midday as Fed weighs on sentiment

People pass a Singapore Exchange (SGX) sign at the central business district, on Jan 18, 2016.
People pass a Singapore Exchange (SGX) sign at the central business district, on Jan 18, 2016. PHOTO: REUTERS

SINGAPORE - Singapore stocks edged up slightly at the opening bell on an overnight rebound in oil prices and after the US Federal Reserve, as widely expected, kept interest rates unchanged.

But local stocks are struggling to hold on to gains as the Fed's cautious tone about volatility in global financial markets weighed on sentiment.

As at 12.30pm, the Straits Times Index was up a fractional 0.04 per cent or 1.04 points at 2,547.72.

Weighing down the bourse is DBS, the fifth worst performer year-to-date. Shares of the bluechip bank fell 1.3 per cent or 18 cents to $13.48.

Global Logistic Properties, among the most actively traded counters, was flat at $1.65, with 22.2 million shares traded. Noble Group, the worst performer on the STI so far this year, was flat at 27.5 cents, with 17.2 million shares traded.

Gainers include Singtel, which rose 0.6 per cent or two cents to $3.45, and OCBC, which rose 0.1 per cent or one cent to $7.63.

Elsewhere in Asia, Hong Kong was up 0.18 per cent, Taiwan was up 0.5 per cent, but Japan was down 0.22 per cent. The gains for Asian equities came after the Fed decided on Wednesday to keep interest rates unchanged at 0.25-0.5 per cent, as expected.

Shanghai was down 0.5 per cent and Shenzhen lost 0.9 per cent.

"The FOMC meeting ended with the Fed mentioning that they would `closely monitor' the global economy. The first month of 2016 displayed high levels of volatility with the weakening of Chinese markets. This volatility trickled to the global markets and is not surprising that the US remains wary of this in order to conduct their policies," Phillip Futures investment analyst Daniel Ang said.

"Considering the Fed's dovish tone after their December 2015 rate hike, it is likely that June 2016 would be the time we see higher interest rates rather than in March 2016," he said.

Mr Ong Kian Lin of RHB Research said he anticipates a "turbulent" first half of the year before a modest rebound in the second half.

"With downward earnings revisions in the ongoing results season and the sharp correction in China equities, the Straits Times Index has returned -11.7 per cent year to date," he said.

"Singapore's growth prospects are increasingly looking uncertain (with the recent worst manufacturing decline in 14 years), and we do not rule out chances of further earnings downgrades in the coming quarters," Mr Ong added. With catalysts lacking in the domestic markets, we expect the share prices of Singapore companies to continue to be swayed by external events, spanning from the volatility in the Chinese equity markets, oil price fluctuations and timing of further US rate hikes."