STI snaps 2-day gains on Fed ‘shock’

SINGAPORE – Local shares snapped a two-day winning streak on Thursday as optimism over better US inflation data was doused by a blunt reality check from the Federal Reserve.

The Fed raised rates a further 50 basis points overnight, but it was Fed chairman Jerome Powell’s hawkish remarks that the central bank had “some ways to go” in its battle against inflation that rattled investors.

Mr Craig Erlam, senior market analyst at Oanda Corporation, said: “Equity markets are back in the red as investors reel from the nasty shock delivered by the Fed. Safe to say, investors simply didn’t see that coming.”

Investors here sent the Straits Times Index (STI) down 4.82 points, or 0.2 per cent, to 3,273.75, tracking similar losses on Wall Street.

Their risk-averse peers elsewhere left key gauges in China, Hong Kong, Japan, Malaysia and South Korea also in the red.

Australian shares were down as well, off 0.6 per cent.

FXTM senior research analyst Lukman Otunuga remarked: “Although there have been signs of inflation cooling, at 7.1 per cent it’s still well above the Fed’s 2 per cent target.

“It looks like the Fed has ended 2022 on a hawkish note, leaving the doors wide open to more rate hikes in the new year in an effort to control inflation.”

Investors were also rattled by the release of more disappointing economic data out of China, this time on retail sales and industrial production in November.

Turnover here came in at 1.31 billion units worth $1.03 billion, with losers outpacing gainers 319 to 216.

Agri-food company Japfa said its AustAsia Group subsidiary is expected to list in Hong Kong on Dec 30. Japfa shares closed up 13.4 per cent at 55 cents.

Sheng Siong also bucked the downward trend, rising 0.6 per cent to $1.66.

It came after a DBS Group report said that Singapore’s oft-overlooked modern grocery sector, where Sheng Siong is a top three player, “remains very much alive with attractive players and growth potential”.

THE BUSINESS TIMES