STI falls as traders eye key Fed testimony

Sentiment will be hurt if Jerome Powell signals a more aggressive monetary tightening policy

It was downhill from the second half of the trading session for the Singapore bourse as investors stayed light ahead of a significant risk event - US Fed chairman Jerome Powell's inaugural semi-annual monetary policy testimony to Congress.

After trending upwards for much of the first-half session, the key Straits Times Index (STI) buckled on cautious sentiment and closed lower by 15.46 points or 0.4 per cent to 3,540.39, which nearly pushed the index into negative territory for the month.

Just one day shy of wrapping up February's trading, the STI is up 0.2 per cent for the month.

Elsewhere in the region, bourses put on a mixed showing. China's Shanghai Composite snapped six straight sessions of gains and fell 1.13 per cent, while Hong Kong's Hang Seng slipped 0.7 per cent.

Japan's Nikkei 225 climbed 1.07 per cent, while Australia's ASX 200 extended gains for the fifth straight session, this time by 0.2 per cent.

The mixed showing in the region follows overnight gains on Wall Street, with both the Dow and the S&P 500 extending their winning streak to a third straight session as concerns eased over inflation.

As the Fed's monetary policy report to Congress last Friday did not offer fresh cues - broad improvement in the US economy, inflation pickup towards end of last year while labour costs were not increasing rapidly - Maybank FX Research said even more attention will be focused on Mr Powell's testimony, chiefly whether he will raise rates at a faster pace than last year.

Mr Hussein Sayed, FXTM's chief market strategist, said: "Investor focus should be on whether recent inflation and wage growth figures are starting to become a concern for the central bank.

"If Powell states that faster-than-expected inflation will lead to a more aggressive tightening policy (suggesting four rate hikes instead of three) in 2018, investors will go back on the defensive and risk appetite will be killed.

"Such a scenario will see a sharp rally in the US dollar and a steep sell-off in equities and bonds."

Turnover on the home front came in at some 2.5 billion shares worth $1.6 billion yesterday versus Monday's 1.7 billion shares worth $1.3 billion.

Losers outpaced gainers with 236 counters down and 204 counters up.

Banking stocks led the losses with DBS Bank down 57 cents or 1.9 per cent to $29.06, while United Overseas Bank fell eight cents or 0.3 per cent to $28.38 and OCBC Bank slipped 14 cents or 1 per cent to $13.33.

Olam International dropped one cent or 0.4 per cent to$2.27.

A one-off gain from divestments of its sugar-refining business in Indonesia and edible nuts farmland assets in the US, lower depreciation and amortisation, and net finance charges lifted Olam's fourth-quarter results. Its net profit rose by more than 2½ times to $265.1 million from the previous year.

Sembcorp Industries rose two cents or 0.6 per cent to $3.22, while rig builder Sembcorp Marine advanced four cents or 1.8 per cent to $2.22.

With both counters outperforming the local benchmark and on track for their first gains since last week, it appears that the market may be looking beyond their weak near-term earnings released last week.

Raffles Medical Group gained six cents or 5 per cent to $1.16.

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