SINGAPORE – Shares across the region took a hammering on Thursday after yet another hefty interest rate hike in the United States to the highest level since 2008.
The Straits Times Index fell 1.2 per cent or 38.62 points to 3,102.51, with losers outstripping gainers 313 to 190 on trade of 1.3 billion shares worth $1 billion.
It was similar in the Asia-Pacific. The Hang Seng Index plunged 3.1 per cent, the KLCI dropped 2.2 per cent, the Kospi slipped 0.3 per cent and the ASX 200 in Australia lost 1.8 per cent. The Jakarta Composite Index was the outlier, ending 0.3 per cent higher.
Federal Reserve chairman Jerome Powell had said “there is still ground to cover” in terms of future rate hikes, adding that the ultimate level of interest rates in this cycle would be higher than previously expected.
Mr Greg Baker, chief executive of TD Ameritrade Singapore, noted: “All eyes are now on whether the Fed will moderate its policy in December’s meeting amid growing fears of a financial crisis.”
Market watchers believe more rate hikes are coming, but said they will be done with more caution.
Oanda analyst Edward Moya said stocks might “struggle” as the risk of the Fed taking rates above 5 per cent remains.
Mr David Page, head of macro research at AXA Investment Managers, expects a 0.5 per cent hike in December and one of either 0.25 per cent or 0.5 per cent in February and 0.25 per cent in March, which will result in “material headwinds to activity”.
Bank of Singapore currency strategist Sim Moh Siong said North Asia currencies have depreciated a fair bit on a year-to-year basis. Central banks across Asia are responding through currency intervention – either verbally or through dollar sales, or tightening monetary policies.
Singapore, he said, has been leading the region in terms of tightening, and the Singapore dollar is “holding up very well” against other Asian currencies.
However, the latest inflation numbers are still “too high for comfort”, which could pave the way for some further tightening in April. THE BUSINESS TIMES
