Banks lead losses on local market

Caution reigned in the local bourse following an overnight sharp sell-off in US stocks ahead of a key US Federal Reserve policy decision later in the day and as traders studied US President Donald Trump's State of the Union address.

While other key regional indices reversed their morning declines, the benchmark Straits Times Index continued the downtrend, finishing 14.8 points or 0.4 per cent lower at 3,533.99 yesterday, January's last trading day.

Despite the weak note over the last two trading days attributed to a "technical correction" necessitated by profit-taking after the recent rally, the Singapore bourse is still up nearly 4 per cent for January.

At current levels, technical chartists said a further consolidation cannot be ruled out although they reckoned the extent should be limited and "bullish bias" will kick in at above 3,470.

Other Asian bourses were mixed with Japan's Nikkei 225, China's Shanghai Composite and South Korea's Kospi extending declines while Hong Kong's Hang Seng and Australia's ASX 200 saw gains.

Traders may have been spooked by the performance of US stocks on Tuesday, with the key indices losing around 1 per cent - their biggest one-day percentage drop in almost a year as volatility spiked and US government bond yields remained elevated.

"Rising Treasury yield serves as an alarm that the risk-free rate and thus, required rate of return for risky asset is climbing. Theoretically, this will lead to lower asset prices when their future cash flows are discounted back," said Ms Margaret Yang of CMC Markets.

Markets seem increasingly spooked by improving US data, rising rates and concomitant Fed hike risks. Maybank FX Research

Market analysts said the recent pullback in global equities appears unwarranted, considering the release of strong fourth-quarter growth numbers from most major economies.

"Markets seem increasingly spooked by improving US data, rising rates and concomitant Fed hike risks," said Maybank FX Research in a note.

The losses in the local bourse - the STI has fallen 43 points or 1.2 per cent over two straight trading days - unfolded ahead of the conclusion of the US Federal Reserve Open Market Committee's policy meeting.

While expectation is high for the Fed to stay put with the interest rate, the market is expecting a more hawkish posture on the back of an improving economy and rising inflation expectations from Fed chair Janet Yellen at her final policy meeting before she steps down.

Turnover in the local bourse stood at 2.3 billion shares worth $1.9 billion yesterday versus Tuesday's 3.2 billion shares worth $1.6 billion.

LOSSES

Dips in Singapore's two out of three banking stalwarts led losses on the local market.

While DBS Bank closed unchanged at $26.40, United Overseas Bank slipped seven cents or 0.3 per cent to $27.43, while OCBC Bank fell six or 0.5 per cent to S$12.93.

Singtel and CapitaLand closed three cents or 0.8 per cent lower at $3.54 and $3.84 respectively.

Catalist's latest entrant LY Corp, a Malaysian wooden furniture maker, closed at 31 cents, up five cents, marking a decent debut of 19 per cent over its offer price of 26 cents.

Datapulse Technology fell 0.5 cent or 1.4 per cent to 35.5 cents, on news the day before that its chief executive Kee Swee Ann has quit barely a month since his appointment that followed an ownership change and board revamp at the company.

Starhill Global Reit rose 0.5 cent or 0.7 per cent to 77 cents.

Although the Reit's second-quarter results were weighed by a challenging Singapore market, RHB Research was optimistic that its asset enhancement initiatives in progress now across many of its overseas assets are expected to contribute positively from FY 2019 onwards.