Traders cheered by Fed's dovish tone

Rise in US benchmark rate leads to stronger sentiment and rebound in Singapore shares

Singapore shares rebounded yesterday after the United States Federal Reserve went ahead to raise interest rates as widely expected.

The Fed's dovish tone, in particular, was a major boost to sentiment as it continued to project two more hikes this year, even as markets globally have been pricing in more.

The benchmark Straits Times Index (STI) rose strongly by 26.09 points, or 0.83 per cent, to 3,163.52, lifted in part by Wall Street's 0.54 per cent gain overnight.

"That said, the Fed is still expecting two more hikes for 2017 and three for the following year," said IG market strategist Jingyi Pan in a note. "This could continue to build a 'lenders cheer, borrowers fear' situation for markets moving forward."

The three Singapore banks had mixed responses following the US rate decision. OCBC Bank lost 0.2 per cent or two cents to $9.63 and DBS Group Holdings dipped 0.05 per cent or one cent to $19.12. United Overseas Bank was the outlier, advancing 1.3 per cent or 27 cents to $21.78.

Higher interest rates in the US are expected to translate to higher net interest margins for the Singapore banks, as interest rates here tend to track those in the US.

Property stocks remained in play as traders continued to focus on the Government's recent tweaks to the cooling measures.

Real estate giant CapitaLand jumped 2.2 per cent or eight cents to $3.73 while City Developments gained 2.6 per cent or 27 cents to $10.50, and UOL grew 2.2 per cent or 15 cents to $6.98.

CIMB maintained a "overweight" call on the sector, noting that property stocks are currently trading at 30 per cent discount to their revalued net asset value on improved market newsflow and potential merger and acquisition activities.

But Maybank Kim Eng kept to its "neutral" rating. It said: "We do not see a full sector recovery as the occupier market could stay weak for an extended period of time with housing-stock increases outpacing population growth... Unless we see a big rebound in home prices, elevated land prices should remain the biggest dampener of developers' profitability."

Blue-chip laggards included telco Singtel, which slipped 0.3 per cent or one cent to $3.95.

Elsewhere, printing firm Abundance International got a Singapore Exchange trading query in the afternoon, after the counter rocketed more than 20 per cent. It surged further to finish 31.3 per cent or two cents higher at 8.4 cents.

The most heavily traded counter was Noble Group, which saw 452.5 million shares changing hands. It was flat at 21 cents after the group proposed a share consolidation of 10 shares into one on Wednesday, in a bid to stave off speculation on the stock.

Other actives included Disa, unchanged at 2.8 cents, and Alliance Mineral Assets, which soared 20 per cent or four cents to 24 cents.

A version of this article appeared in the print edition of The Straits Times on March 17, 2017, with the headline 'Traders cheered by Fed's dovish tone '. Print Edition | Subscribe