RARELY has a US Federal Open Markets Committee (FOMC) meeting been as widely anticipated as the one held this week, and rarely has its impact been as disappointing. After almost unanimously discounting a first rate hike in seven years in the run-up to the meeting, then seemingly embracing it when the FOMC delivered it on Wednesday, Wall Street's sudden slump on Thursday suggests that markets are still locked in monetary expansion mode, preferring rates to remain depressed.
News reports on Wednesday attributed the US market's rise that day to the Fed's "dovish" comments, namely that rate hikes would be "gradual". Most commentators described it as a "relief rally", ie investors, relieved that a hike had finally arrived, were buying because a hike meant the economy is recovering.
On Thursday however, the tune changed as investors realised there's no such thing as a dovish rate hike, with one analyst warning investors to "beware of the hawk in dove's clothing".
Whatever the case, the impact here was rises for the Straits Times Index before and immediately after the FOMC meeting, but an 8.34 points loss on Friday cut its gain for the week to 18 points or 0.6 per cent at 2,852.84.
Liquidity remained as weak as it has been throughout this year, with Friday's 824 million worth S$924.3 million within recent averages. Apart from the upcoming holidays, brokers cited a general avoidance of most emerging markets by investors as the main reason.