Hopes of US Fed rate cut spur STI and DBS to new records

SINGAPORE – The blue-chip gauge of the Republic, the Straits Times Index (STI), soared to a new record of 4,395.21 points on Oct 2 after surging 72.09 points or 1.7 per cent, fuelled by the expectation of an interest rate cut by the US Federal Reserve.

The STI broke the previous record of 4,355.82 that it reached on Sept 11, with all but two of the 30 component stocks ending higher on Thursday. Thai Beverage and Wilmar International shares were unchanged at 46.5 cents and $2.88 respectively at market close.

DBS also clocked a record high at $52.84, after rising $1.26 or 2.4 per cent. Its peers, however, failed to reach fresh highs, although UOB shares increased $0.39 or 1.1 per cent to $35.07 and those of OCBC were up $0.25 or 1.5 per cent at $16.76.

DFI Retail Group was STI’s top performer with a 4.7 per cent or US$0.15 improvement in its share price to US$3.37.

The better STI showing came amid fresh highs logged by both the Dow Jones Industrial Average and S&P 500 set, which closed up 0.1 per cent and 0.3 per cent, respectively, on Oct 1. Nasdaq had ticked up 0.4 per cent.

Data released on Wednesday showed that factory activity in the US had

declined for a seventh straight month in September

, strengthening expectations of a rate cut this month and fuelling a rally on Wall Street.

Mr Vasu Menon, managing director for investment strategy at OCBC, meanwhile noted that markets appeared to have shrugged off the US government shutdown. “Investors remain optimistic that the shutdown will be brief and have minimal economic impact. Some anticipate a relief rally if signs emerge indicating progress towards a spending agreement in Congress,” he said.

This episode, however, could carry greater risks due to a slowing labour market, inflation concerns, elevated stock valuations, and high market concentration, the industry watcher commented.

Across the broader market in Singapore, 398 stocks rose while 205 declined amid a transaction volume of 1.9 billion valued at $2.1 billion in total.

CapAllianz was the most active stock with 65.4 million shares transacted on Thursday. Shares of the Catalist-listed investment holding firm – which owns a subsidiary that is engaged in software development and IT consulting – plunged 33.3 per cent or $0.001 to $0.002.

THE BUSINESS TIMES