Traders hold back ahead of Fed decision

Closely watched US meeting in progress, cautious stance mirrors that on Wall Street

Local stocks retreated yesterday as traders stayed on the sidelines ahead of the United States Federal Reserve's closely watched interest rate decision.

The benchmark Straits Times Index (STI) pared 3.75 points, or 0.12 per cent, to 3,143.4, while turnover across the bourse totalled 1.39 billion shares worth $1.13 billion.

DBS Equity Research analyst Yeo Kee Yan said the rally in Singapore shares, which have performed strongly since the start of the year, is likely to encounter a pause.

"Equity markets may have to get past the March Federal Open Market Committee meeting and the April French elections before resuming their climb," he said.

The cautious stance here mirrored that on Wall Street, which dipped 0.1 per cent overnight.

The market consensus worldwide is that the Fed is almost certain to raise interest rates at its two-day meeting now under way.

Mr Mike Bell, global market strategist at JPMorgan, said in a note: "Markets fully expect a rate rise, so market reaction is likely to be muted unless the Fed disappoints, which would lead to lower bond yields and a lower dollar, although that is not our expectation."

Elsewhere in Asia, Tokyo eased 0.12 per cent while Hong Kong dipped a marginal 0.01 per cent.

Shanghai inched up 0.07 per cent after official data showed an improvement in industrial production and retail sales. Sydney added 0.03 per cent.

Some of the biggest losers on the STI included Golden Agri-Resources, which fell 2.6 per cent or one cent to 37.5 cents, while Keppel Corp lost 2.22 per cent or 15 cents to $6.60 as oil prices continued to slide amid oversupply worries.

A number of property plays also clocked losses as investors moved to lock in their profits. City Developments shed 1.8 per cent or 19 cents to $10.31 and CapitaLand slipped 0.8 per cent or three cents to $3.66.

On the other side of the ledger, all three local banks fared well, led by DBS Group Holdings, which gained 0.4 per cent or eight cents to $19.19.

United Overseas Bank put on 0.2 per cent or five cents to $21.54 while OCBC Bank climbed 0.1 per cent or one cent to $9.62.

Mr Kelvin Wong, chief technical strategist for Asia at City Index, said that changes to the tone of the Fed's monetary policy statement after its meeting could affect the share prices of the banks.

"There is a chance that the Fed may sound more upbeat on future long-term inflation expectations that can solidify the pace of the remaining two projected interest rate hikes for 2017," said Mr Wong in a note.

"If such a change of tonality materialises, it may drive up the share prices of the Singapore banks on a short- to medium-term horizon."

ISR Capital was the day's most heavily traded stock, jumping 12.5 per cent or 0.3 cent to 2.7 cents, with 101.5 million shares traded.

A version of this article appeared in the print edition of The Straits Times on March 15, 2017, with the headline 'Traders hold back ahead of Fed decision'. Print Edition | Subscribe