Singapore stocks extend rally; STI resumes afternoon up 1.7%

EXPECTATIONS that US interest rates will stay lower for longer lifted Singapore shares on Friday, in line with most Asian markets.

This comes after Federal Reserve boss Jerome Powell on Thursday announced a landmark policy shift that prioritises a strong job market over inflation fears that could see interest rates stay low for the foreseeable future.

Essentially, the new strategy incorporates a loose form of average inflation targeting, where the Fed is willing to let inflation run higher than it was willing to tolerate previously, to make up for periods when inflation is too low. Over time, inflation would average 2 per cent.

Stephen Innes, chief global markets strategist at AxiCorp, said in a research note on Friday that the Fed's latest policy move is being viewed favourably for Asia today as investors around the world "universally like the sound of cheap money".

Likewise, Oanda senior market analyst, Jeffrey Halley told The Business Times on Friday that Singapore stocks have risen as US index futures rose strongly in Asia after-hours trading.

"Banking shares led the rally after a steeper US yield curve boosted the sector in New York overnight. Property stocks were also boosted by the prospect of lower US rates as Singapore interest rates closely reflect those in the US market," Mr Halley said.

On the Singapore bourse, equities extended the morning rally to resume trading in positive territory following the midday break.

The benchmark Straits Times Index (STI) advanced 43.69 points or 1.7 per cent to 2,563.50 as at 1.03pm.

Gainers outpaced losers 233 to 144, with some 1.53 billion securities worth S$628.9 million changing hands.

Among the index securities, the most heavily traded counters by volume were Thai Beverage, which rose 0.5 Singapore cent or 0.8 per cent to 61.5 cents, with 27.7 million shares traded, while Singtel added S$0.03 or 1.3 per cent to S$2.32, with 13 million shares traded.

Also buttressing the STI was the trio of local lenders. DBS jumped S$0.51 or 2.5 per cent to S$20.97, United Overseas Bank rose S$0.39 or 2 per cent to S$19.87, while OCBC Bank surged S$0.19 or 2.2 per cent to S$8.80.

Other active securities included Singapore Airlines which gained S$0.11 or 3 per cent to S$3.74, while Mapletree Logistics Trust added S$0.06 or 2.9 per cent to S$2.10.

Property bellwether CapitaLand advanced 2.6 per cent or S$0.07 to S$2.82 by the afternoon trade.

Elsewhere in the region, most Asia stocks echoed the Wall Street cheer overnight.

Hong Kong rose 0.6 per cent, while Seoul jumped more than 1 per cent, Reuters reported in its Asia wrap just before noon on Friday.

However, Tokyo stocks tumbled more than 2 per cent after reports said Japanese Prime Minister Shinzo Abe was set to resign owing to health reasons. The Nikkei dropped 2.1 per cent by the afternoon trade, reversing earlier gains. Mr Abe is expected to give a news conference on Friday afternoon where he will discuss his health.