Banks prop up STI's weak week

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Despite Wall Street's positive response to Fed moves, index struggles; more activity brewing in broad market

On paper, the key event this week was the United States Federal Open Market Committee (FOMC) meeting held over Tuesday and Wednesday.

Although no interest rate hike was expected, the market was waiting for information on two fronts: the Fed's "dot plot", which provides an insight into how many more rate hikes Fed officials think are needed, and the schedule for the unwinding of the US central bank's US$4.5 trillion (S$6.04 trillion) balance sheet.

The first indicated three more hikes by the end of next year, which means a gradual pace of tightening, one in December and two throughout the whole of next year.

The second also came as a relief. Starting next month, the Fed will sell bonds back to the market at an initial rate of US$10 billion, a pace seen as measured enough to keep markets happy.

Despite Wall Street's positive response to the Fed's moves, the impact in Singapore was minimal, at least as far as the Straits Times Index was concerned.

The 30-stock benchmark fell for three of the five days, though yesterday's gains in the banks helped it to record a 6.43-point rise to 3,220.25, enabling it to register an 11-point or 0.3 per cent rise for the week.

Yesterday's session was actually weak, with the broad market chalking up 165 rises versus 229 falls. In short, the FOMC meeting turned out to be a non-event, at least as far as the Singapore market was concerned.

"The Fed announcement was seen as being more hawkish than expected, with a signal that it is still considering another interest rate rise in December..." Schroders' chief economist and strategist Keith Wade

With the exception of sporadic spikes that occurred when index stocks such as Yangzijiang Shipbuilding, Singapore Press Holdings and ComfortDelGro saw enhanced trading activity, volume was mediocre. Turnover was a disappointing 1.4 billion units worth $1.02 billion.

But the index's performance tells only one side of the story; there is activity brewing in the broader market.

Shareholders of Poh Tiong Choon Logistics were told this week of a takeover-cum-privatisation offer at $1.30 a share from the company's chairman, a 32.5 per cent premium to the one-month volume weighted average price per share.

Semiconductor company Asti Holdings also announced this week that it had signed a non-binding agreement with China Fortune-Tech Capital to sell some Asti subsidiaries for $105 million to $115 million.

Crane specialist Tat Hong on Thursday announced that it has been approached by "certain parties in connection with a potential transaction in relation to the securities of the company", adding that discussions are ongoing and there is no guarantee that the talks will lead to a deal being struck.

Not surprisingly, Tat Hong's shares jumped $0.065 or 16 per cent to $0.47 on volume of 14.8 million yesterday.

As for US interest rates, Schroders has a different view.

"The Fed announcement was seen as being more hawkish than expected, with a signal that it is still considering another interest rate rise in December..." said chief economist and strategist Keith Wade.

"Our view remains that the Fed will wait longer so as to gain reassurance on inflation coming back to target and will delay the next move until later next year."

This article appears in The Business Times today. For full listings of SGX prices, go to