Singapore stocks barely up as markets elsewhere cheer prospect of lower Fed hikes

SINGAPORE – Local shares remained largely indifferent to positive talk on interest rates from the United States overnight, ending flat on Thursday.

Markets elsewhere, including a buoyant Wall Street, were in a markedly upbeat mood on strong hints that the US Federal Reserve would be taking a less hawkish stance on rates.

Wall Street had been languishing in negative territory for much of the session overnight but the rates speculation sent shares soaring.

The S&P 500 shot up 3.1 per cent late in the day while the Dow Jones rose by 2.1 per cent and the Nasdaq rocketed 4.4 per cent. Most regional markets closed higher, with Australian shares grabbing the limelight, rising 0.9 per cent to a seven-month high on the back of a surging materials sector.

The sentiment elsewhere was largely lost here, with the Straits Times Index (STI) adding just 0.1 per cent or 2.24 points to 3,292.73.

Gainers beat losers 344 to 212 across the broader market with 1.4 billion shares worth $1.3 billion transacted.

Part of the drag on the market here stemmed from the three local banks, which account for over 40 per cent of the STI. Slower interest rate hikes would mean limited upside for their net interest margins.

DBS and OCBC both dropped 0.7 per cent although UOB managed to defy the trend to add 0.4 per cent to $31.33.

Investment products distribution platform iFast Corporation, in contrast to the banks, jumped 8.1 per cent to $5.73, as lower interest rates augur well for stock investing.

DBS Group Research remains wary of new-found investor optimism, suggesting that markets are underestimating the Fed’s resolve to control inflation.

It noted in a report on Thursday that the next US Fed meeting is shaping up to be a “buy on rumour, sell on fact” event risk, and that markets are discounting the smaller 50 basis point hike while ignoring the Fed’s earlier message to lift its 2023 target above 4.6 per cent.