Bulls And Bears

US rate hike worries cast shadow over STI

Singapore investors hold back, with 25 blue chips in the red and only two posting gains

Singapore equities started the week on a dull note after United States Federal Reserve chair Janet Yellen last week signalled the case for a rate hike has grown stronger.

The benchmark Straits Times Index (STI) slid 28.22 points or 0.99 per cent to 2,829.4.

Last week's headline numbers on Singapore's July industrial production - down 3.6 per cent on the year - also put a dent on sentiment.

Elsewhere in Asia, Hong Kong lost 0.38 per cent, Shanghai pared 0.01 per cent, and Sydney shed 0.84 per cent. Tokyo bucked the trend, rising 2.3 per cent on a weaker yen.

Wall Street eased 0.29 per cent last Friday after a volatile session.

Traders are pricing in the possibility of a rate hike next month, although Dr Yellen did not commit to an exact timing in her speech.

Much will depend on the US non-farm payroll data released at the end of this week, said Mr Richard Jerram, chief economist at Bank of Singapore.

"A soft number would be no surprise after two unusually strong months, which would put paid to the chance of a move in September," said Mr Jerram in a note, although he added that a move in December is more likely, followed by two or three hikes next year.

Of the 30 STI constituents, only two clocked gains - Sats, which rose eight cents or 1.7 per cent to $4.90; and SIA Engineering, up one cent or 0.3 per cent to $3.86.

A total of 25 blue chips fell into the red while three were flat.

Casino operator Genting Singapore was among the biggest losers, falling two cents or 2.6 per cent to 73.5 cents, along with telco Singtel, which lost 10 cents or 2.4 per cent to $4.12.

All three local banks finished lower, with DBS Group Holdings retreating seven cents or 0.5 per cent to $15.03. OCBC Bank dropped four cents or 0.5 per cent to $8.58, and United Overseas Bank slipped five cents or 0.3 per cent to $18.

Oil and gas-related plays also fared poorly as crude prices took a hit in the wake of Dr Yellen's comments. Conglomerate Keppel Corp fell 10 cents or 1.9 per cent to $5.27 and Sembcorp Marine shed 1.5 cents or 1.1 per cent to $1.30.

A Saxo Capital Markets report noted that while oil prices have calmed down after a couple of rocky weeks, further upside above US$50 a barrel is likely to be limited ahead of September, which has been a challenging month for the commodity in the past five years.

"The big question remains whether a deal can be struck, given that key players such as Iran still reserve the right to continue to increase production," it said, referring to the upcoming International Energy Forum in Algiers, where several Opec members may meet.

Noble Group, the top traded, fell half a cent or 3.9 per cent to 12.4 cents on 57.5 million shares done.

Turnover was thin, with just 719.2 million shares worth $733.8 million changing hands across the bourse.

A version of this article appeared in the print edition of The Straits Times on August 30, 2016, with the headline 'US rate hike worries cast shadow over STI'. Subscribe