Business

STI retreats 11.11 points

Delayed announcement of US tax reform and confirmation of the next US Federal Reserve chair leads to weak trading

Ahead of the delayed announcement of US tax reform and confirmation of the next US Federal Reserve chair, "Super Thursday", as some dubbed it, was not that spectacular for the local market nor quite a few regional indices.

The benchmark Straits Times Index (STI) retreated 11.11 points or 0.33 per cent to close lower at 3,380.50, dragged by losses in stocks in the financial and consumer staples sectors.

Turnover for the day came in at 2.3 billion worth $1.1 billion. Excluding warrants, losers beat gainers 285 to 170, indicating weak trading.

Both OCBC Bank and United Overseas Bank chalked up combined index losses of about six points, while Thai Beverage's counter alone was over one point.

OCBC shares fell 14 cents at $11.80, while UOB's counter went down seven cents to end at $24.79 yesterday.

DBS Bank shares edged up one cent to finish at $23.

Thai Beverage, which recently acquired a 75 per cent stake in Myanmar Supply Chain and Marketing Services and Myanmar Distillery, lost one cent to wrap up at 97 cents.

Artivision Tech remained on the actives list yesterday after its shares on Wednesday surged on news of a proposed acquisition that may lead to a reverse takeover and entry into the fast-growing fintech business.

The stock closed unchanged at $0.021 on a volume of 74 million units.

Energy stocks including Magnus Energy, Charisma Energy and KrisEnergy were also actively traded as oil prices rose in Asia trade.

Across the region, the Hong Kong, Shanghai, Malaysian, Korean and Australian indices ended their day on a glum note, save for Tokyo stocks which rose to a fresh 21-year high and the New Zealand index that edged up a touch.

No surprises came yesterday from the US Federal Open Market Committee (FOMC) meeting where interest rates have been held, but it did indicate that the US economy is picking up, paving the way for a rate hike in December.

Already, the probability of a rate hike next month is over 80 per cent, said Mr Lee Ferridge, head of multi-asset strategy for North America at State Street Global Markets.

"It seems it would take a major deterioration in the data - possibly starting with Friday's labour market report - to deter the Fed from tightening in December," he said.

What would give certainty to investors would be the confirmation that current Fed governor Jerome Powell is the chosen one to replace Ms Janet Yellen as the new Fed chair.

It has been reported that the White House had notified Mr Powell that he would be the nominee.

CMC analyst Margaret Yang noted in her morning note that markets were not expecting any surprise from the Bank of England - widely expected to raise interest rates for the first time in nearly a decade.

She said the fast depreciation in sterling has sent the country's inflation rate to three per cent and the economy has showed signs of solid growth recently.

Raising a few eyebrows was Japan's Prime Minister Shinzo Abe, who described the appointment of the Bank of Japan's governor as a "blank slate", in turn throwing some uncertainty into the future of the current governor Haruhiko Kuroda whose term ends next October.

As Mr Rob Carnell, ING's head of research in Asia pointed out, Mr Abe's remark is not exactly a ringing endorsement even though Mr Kuroda remains the market's top pick.

Other events ahead that could sway market sentiment would be the delayed US tax reform and US non-farm payroll today.

Said a DBS Group Research report: "Further delays would likely mean a grind lower in yields.

"Barring an aggressive Tax Bill being passed, we suspect that longer-term US treasury yields are likely range-bound in the short term.

This article appears in The Business Times today. For full listings of SGX prices, go to http://btd.sg/BTmkts