Singapore stocks end flat amid concerns over more rate hikes

PERSISTENT concerns over global high inflation, as well as more rate hikes from the United States Federal Reserve, sent Asian markets closing in the red on Friday (Sep 16).

Both the Shanghai and Shenzhen index in China ended 2.3 per cent lower; Japan’s Nikkei 225 declined by 1.1 per cent. Hong Kong’s Hang Seng Index fell 0.9 per cent, and South Korea’s Kospi lost 0.8 per cent.

Singapore, however, bucked the trend. The benchmark Straits Times Index (STI) edged up slightly – by 0.01 per cent – rising 0.31 points to 3,268.29. Losers outnumbered gainers 284 to 213, with about 1.71 billion securities worth S$1.9 billion changing hands.

Vasu Menon, executive director of investment strategy at OCBC Bank, said that the US’ August inflation coming in higher than expected has led some market watchers to believe that the risk of the Federal Reserve increasing the interest rate by 100 basis points (bps), instead of last week’s consensus of a 75 bps hike, has gone up quite sharply.

He believes that the Fed would still be raising rates by 75 bp during its Federal Open Market Commitee meeting next week, and by another total of 100 bps over the next few months to reach a rate of between 4 and 4.25 per cent at least.

“This is also the view of the money markets at this juncture. But if inflation continues to be sticky because the job market and wage growth stays strong, there is a risk that the Fed could hike rates by 100 bps in time, and take the fed funds rate past the 4.25 per cent level,” he said.

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Among STI constituents, Yangzijiang Shipbuilding was the day’s top performer, ending 5.6 per cent higher, or S$0.055 to S$1.03.

City Developments was the top decliner, falling 2.2 per cent, or S$0.18 to S$8.17.