Singapore shares drop 0.6% after US Fed chair’s hawkish testimony

THE US Federal Reserve chair’s testimony last night has not only opened the door to more interest rate hikes, but has also sent investors in Asian markets – including Singapore – scurrying for the exit on Wednesday (Mar 8).

Singapore’s Straits Times Index (STI), together with several key stock indexes in the Asia-Pacific, closed lower. The STI dropped 0.6 per cent or 18.41 points to 3,226.86, with only five out of the 30 component stocks closing higher; two remained unchanged, and the rest ended the day in the red.

Across the broader market, decliners beat gainers 334 to 199, with 1.5 billion securities worth a total S$1 billion transacted.

The United States yield curve became more inverted – a recession indicator – after Fed chair Jerome Powell’s hawkish testimony to the Senate, with the yield on the two-year US Treasury note rising 12.2 basis points to 5.008 per cent, and the 10-year yield virtually unchanged at 3.964 per cent. 

Higher interest rates generally bode well for lenders, but the risks of a recession are also rising. And higher risk-free rates impact investor sentiment, especially for real estate investment trusts (Reits).

The banking trio had a mixed showing: UOB : U11 0% was marginally up 0.1 per cent to S$29.47. DBS : D05 0% slipped 0.4 per cent to S$33.71, and OCBC : O39 0% was 1 per cent lower at S$12.55.

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Of the over 40 Reits and property trusts listed on the Singapore Exchange, only two – EC World Reit : BWCU 0%and Far East Hospitality Trust : Q5T 0% – managed to chalk up gains. Most were down and only a few were unchanged in terms of unit prices.

EC World Reit units rose 1.5 per cent to S$0.345, a day after its manager announced that the sponsor had released more funds from escrow to pay for some of the Reit’s outstanding mandatory bank repayments.

Ground-handler and in-flight caterer Sats : S58 0% slid 1.6 per cent to S$2.46, approaching its 52-week low of S$2.355.