Singapore shares close higher after gains in China, HK and Dow futures

GAINS in China, Hong Kong and the Dow futures helped the Straits Times Index rise 15.88 points to 2,682.39 on Tuesday in decent volume of 1.4 billion units worth S$1.5 billion. Of this, S$927 million or 62 per cent came from trading in index members while the broad market recorded an advance-decline score of 233-147 excluding warrants.

After the market closed on Monday, China's central bank cut its banks' reserve ratio by 0.5 percentage point, which means most large China banks will have a reserve ratio of 17 per cent.

The Economist Intelligence Unit's regional director for Asia, Duncan Innes-Ker said that the cut shows the central bank straining to maintain loose monetary conditions in a difficult economic climate.

"The move will partly offset the effects of capital outflows from China and the provisioning requirements that are forcing banks to lock up more funds, as non-performing loans climb," he said.

"However, the surge in loans in January highlighted concerns that bank lending may be spiralling out of control. Ultimately, China's economy cannot grow on credit alone. It needs further reforms to unlock productivity growth."