STI snaps 2-day gains, falls 0.2% on Fed ‘shock’

SINGAPORE shares ended a two-day winning streak on Thursday (Dec 15) as cheer over lower-than-expected US inflation data faded, following a hawkish tilt by the Federal Reserve (Fed) overnight.

The key Straits Times Index (STI) retreated 4.82 points or 0.2 per cent to 3,273.75, tracking losses on Wall Street after the Fed scorched the market’s dovish hopes.

Craig Erlam, senior market analyst at Oanda Corporation, said: “Equity markets are back in the red on Thursday, as investors reel from the nasty shock delivered by the Fed, and look ahead to the plethora of central bank rate decisions on the agenda today. Safe to say, investors simply didn’t see that coming.”

Fed chief Jerome Powell said the central bank had “some ways to go” in its battle against inflation. On the back of that, investors turned risk-averse, as fears resurfaced over the global economy, and of a potential recession. Key gauges in China, Hong Kong, Japan, Malaysia and South Korea closed in the red as well.

The Fed raised policy rates by a widely-expected 50 basis points (bps), below an aggressive strategy to hike by 75 bps.

FXTM senior research analyst Lukman Otunuga remarked: “Although there have been signs of inflation cooling, at 7.1 per cent it’s still well above the Fed’s 2 per cent target. With policymakers projecting rates would end next year at 5.1 per cent, this was higher than futures markets had predicted and the previously-indicated 4.6 per cent at their last dot plot in September.

“It looks like the Fed has ended 2022 on a hawkish note, leaving the doors wide open to more rate hikes in the new year in an effort to control inflation.”

Also weighing on sentiments was the release of more disappointing macro data out of China, this time on retail sales and industrial production in November, which clouded the prospects of the world’s second-largest economy.

Turnover on the local bourse came in at 1.3 billion units worth S$1 billion. Losers outpaced gainers, with 319 counters down and 216 up.

Japfa said its subsidiary AustAsia Group is expected to list on the Hong Kong Stock Exchange on Dec 30. AustAsia on Thursday received in-principle approval for its proposal to list on the exchange. Japfa shares finished the day at S$0.55, up S$0.065 or 13.4 per cent.

Sheng Siong also bucked the bourse’s losses on Thursday. A DBS Group report said that Singapore’s oft-overlooked modern grocery retail industry, where Sheng Siong is one of the top three players, “remains very much alive with attractive players and growth potential.” Sheng Siong shares rose S$0.01 or 0.6 per cent to S$1.66.