Singapore stocks pull back, erase weekly gain as rate hike fears return; STI down 1%

MARKETS went topsy-turvy again as doubt returned on the second day after the release of cooler-than-expected US inflation data, leading the Straits Times Index (STI) to fall 1 per cent on Friday (Aug 12), erasing the week’s gains.

This time, it was on sentiment, including that of Federal Reserve officials, that the US central bank is unlikely to pivot from its hawkish interest rate hikes despite softening inflation data.

The STI closed 32.69 points lower at 3,269.27, while Asia-Pacific markets ended mixed, with Japan’s Nikkei 225 notably surging 2.6 per cent on its return to trading after a holiday. 

Indices in Hong Kong and South Korea closed 0.5 per cent and 0.2 per cent higher respectively, while Australia’s ASX was down 0.5 per cent. 

Oanda senior market analyst Edward Moya said markets reacted as Wall Street started to second guess how soon the Fed will find itself in a position to pivot after a little pushback.

“Fed rate hike expectations will bounce between a half-point and 75 basis points ahead of the September policy meeting, but it is way too early to continue to expect the next round of inflation readings to keep that declining pace,” he said.

Among STI constituents, the biggest losers for the day were Jardine Matheson, which tumbled 6.5 per cent to US$51.20, and Thai Beverage, which fell 3.7 per cent to S$0.655. 

The trio of local banks all ended down, with OCBC losing the most, closing 2.3 per cent lower at S$12.17. DBS lost 0.4 per cent to S$33.35, while UOB fell 0.3 per cent to S$27.32. 

Only 3 constituent stocks managed to post gains – City Developments Limited, CapitaLand Integrated Commercial Trust and Venture Corporation, which closed 1.2 per cent, 0.5 per cent and 0.1 per cent higher, respectively.

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Across the broader market in Singapore, losers outnumbered gainers 271 to 220, after 1.46 billion securities worth S$1.1 billion changed hands.