SINGAPORE - Profit-taking on DBS Group and OCBC Group sent Singapore shares lower on Thursday after minutes from the United States Federal Reserve's most recent meeting showed officials were divided on the US inflation outlook and when they will start reducing the central bank's assets stockpile.
The key Straits Times Index finished 0.69 per cent or 22.37 points down at 3,226.34, weighed down by the banks. ComfortDelgro shed 1.8 per cent or four cents to $2.23; Golden Agri lost 1.3 per cent or 0.5 cents to 37.5 cents; CapitaLand dipped 0.5 per cent or one cent to $3.50.
DBS fell 1.7 per cent or 36 cents to $20.74; OCBC shed 1.7 per cent or 18 cents to $10.65. UOB lost 0.7 per cent or 16 cents to $23.19. This after the Federal Open Market Committee's June meeting minutes showed that officials were divided on how to approach policy strategy at a time of low inflation and when to unwind the Feds' US$4.5 trillion balance sheet.
Some perceived the FOMC minutes as hawkish. "They made a note of financial risk from elevated asset prices, which supports the case for a rate hike without data dependence," Mr Stephen Innes, senior trader at OANDA said.
The asset reduction by the Fed will impact on market liquidity and could potentially cause US interest rates to rise. Investors are eyeing US June jobs data due tomorrow 2 am Singapore time. July 7 for clues on the pace of rate hikes.
UOB Kay Hian maintained an overweight call on local banks, saying that "normalisation of central banks' balance sheets could energise bank stocks and lift their valuations."
It also anticipates "a gradual re-rating for banks' share prices, with DBS's target price at $25 levels and OCBC's target price at $13 levels."
Meanwhile, investors took profit on banks and bought into property stocks, a remisier said. City Developments jumped 1.5 per cent or 16 cents to S$10.83. Yanlord Land Group rose 0.3 per cent or 0.5 cents to $1.77.