Hawkish Fed is this week's main feature
US Fed eyes three, instead of two, interest rate hikes next year
The US Federal Open Markets Committee meeting this week was meant to be a non-event as markets had for several weeks already been expecting an interest rate hike.
As it turned out, the Fed lived up to expectations with a 25 basis points rate hike but simultaneously indicated that there could be three more hikes next year instead of the two that markets had forecast.
This unexpected hawkishness brought the sellers out, dragging the Straits Times Index (STI) 23 points lower on Thursday.
Even with a 7.09 points rebound on Friday, the STI lost a nett 20 points or 0.7 per cent over the week at 2,937.86.
Liquidity has been a problem throughout the year, the daily average rarely rising significantly above $1 billion to 1.3 billion except on the last days of most months, when odd price movements customarily placed under the broad umbrella of "window dressing" typically take place.
On Friday, though, turnover was 2.3 billion units worth $1.3 billion. Excluding warrants, there were 209 rises versus 221 falls.
A push on the three banks has been the main factor behind the STI's rise into the black for 2016, with notable contributions coming from Singtel and oil-and-gas plays such as Keppel and SembCorp Marine.
In Singtel's case, trading was subdued this week - mainly because of the impending entry of a fourth player into the domestic mobile phone market: Australia's TPG Telecom.
Most analysts view Singtel as being the least hurt by TPG's arrival as Singtel has significant overseas operations.
M1 is thought to be the most vulnerable; after plunging $0.07 on Thursday, it was unchanged on Friday at $1.95.
Elsewhere, casino operator Genting Singapore (GS) has been in focus over the past few weeks because of better-than-expected earnings as well as hopes that it will be able to benefit if and when Japan legalises casinos.
Tokyo did so this week, though Genting possibly fell victim to "buy in anticipation, sell on news", dropping $0.015 to $0.945 with 41.4 million shares done yesterday.
OCBC Investment Research yesterday said even assuming that its 4 per cent terminal growth rate does not already reflect greater growth opportunities for the company, GS's current price in excess of the broker's fair value seems to imply an optimistic 40 per cent chance of winning a Japan casino licence, based on rough estimates given the lack of details at this point. It maintained a "sell" with $0.75 fair value.
Natixis Asset Management's Ibrahima Kobar, co-chief investment officer and head of fixed income, said in a press statement that uncertainties and political risk will still be present in 2017.
"Europe will remain at the very heart of concerns due to Brexit and elections in France," he said.
"Divergence of monetary policies may also trigger pressure on the bond markets.
"Lastly, Opec members' resolve will be tested when faced with the expected rebound in US output.
"The steep yield curve will safeguard investors in the fixed-income markets, but we should expect greater volatility in 2017. Diversification will be key."
This article appears in The Business Times today. For full listings of SGX prices, go to http://btd.sg/BTmkts