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THE US Federal Reserve did what was expected of it when it raised its short-term interest rates by 25 basis points on Wednesday, prompting what some believe is a "relief rally" in stocks. The logic was that markets have agonised over when the first rate hike would occur and that when it finally did arrive, there was a sense of relief that lifted prices.
Here, the Straits Times Index gained 20.26 points at 2,861.18 in response to the news in tandem with rises elsewhere in the region. It was the index's second successive rise, albeit one that came in low volume of 921.5 million units worth just over S$1 billion. Excluding warrants there were 226 rises versus 164 falls.
The day's most active stock was Addvalue Technologies, which rose S$0.008 or 20.5 per cent to S$0.047 on volume of 43.6 million. The company announced that the VELOX-II satellite, which was built by Nanyang Technological University under a contract by Addvalue, carried Addvalue's proprietary data relay terminal as its primary payload and was successfully launched into a low earth orbit on Dec 16 by an Indian rocket.
On the US rate hike, Bank of Singapore's chief economist, Richard Jerram, in his Dec 17 Economics Research report said his concern is that the markets are underestimating the potential for a sequence of rate hikes over the next couple of years.