China, HK gloom cast shadow on STI
THE weak tone of markets in China and Hong Kong sent S-chips - China shares listed here - heading south yesterday.
The broader Singapore market was generally muted as investors awaited a policy announcement by United States central bankers at the end of their Federal Open Market Committee meeting early today, as well as the release of US first-quarter gross domestic product data, traders say.
While the general feeling is that the Federal Reserve will announce its first interest rate hike since 2006, but timed for the second half of the year, a surprise earlier hint would cause major movements in global financial markets.
The uncertain environment left the Straits Times Index down 7.94 points or 0.23 per cent to 3,487.14, its second consecutive day closing below 3,500 points after trading above this psychological support level for a week.
The FTSE ST China Top Index that measures the leading 20 Chinese companies listed here closed 0.99 per cent lower at 212.95 on developments elsewhere.
Stocks in Shanghai traded in the red for most of the day following a warning by China's securities regulator about excessive speculation, but they managed to end 0.01 per cent ahead on a late rebound.
The China Securities Regulatory Commission told new share investors on Tuesday not to overlook the possibility of losses, and China's biggest brokerage Citic Securities has restricted the number of China shares it would accept for margin lending.
The most active S-chip stock was Sino Construction, which fell 0.2 cents or 4.7 per cent to four cents with 83 million shares traded. Cosco was down two cents or 3.2 per cent to 61 cents, while Ying Li International fell one cent or 3.7 per cent to 26 cents.
Most eyes remain on the US. Market consensus expects the economy to have grown 1 per cent in the first quarter, from 2.6 per cent in the previous quarter.
Economists say the pace of the recovery has changed, allowing the Fed to hold off hiking rates soon.
"Put whatever adjective you like next to the word - lousy, solid, fast, slow - the bottom line is: recovery continues," DBS Group Research said in a note.
"The question for the Fed, and everyone else, though, isn't whether recovery continues. The question is how far has it progressed?"
DBS added: "Always sceptical of a June 15 hike, markets have pushed a first Fed hike all the way out to January 2016."