Feb 05, 2016

    Hopes of deferred Fed rate hike lift sentiment

    ASIAN shares recouped some of their losses yesterday, as investors speculated that the United States Federal Reserve's interest rate hiking programme may be put on hold.

    The prospect the Fed may hold off further rate hikes for some time gained traction after the US service sector expanded less than expected last month.

    Earlier this week, data also showed that US manufacturing contracted for the fourth straight month in January.

    These fresh signs of economic weakness may cause the Fed to stay its hand, they reason.

    Ironically, an overnight rally on Wall Street prior to the latest data - spurred on by an oil price recovery to above US$35 per barrel - added to the Asian optimism.

    Shanghai rose 1.52 per cent and Hong Kong added 1.01 per cent. Kuala Lumpur put on 1.44 per cent and Sydney closed up 2 per cent.

    Singapore's Straits Times Index gained 7.75 points or 0.3 per cent to 2,558.49. Volume rose slightly, with 722.5 million shares worth $764 million changing hands.

    The rally yesterday is likely just a market blip, said Barclays chief economist Leong Wai Ho, cautioning that speculation over Fed rate hikes is always very fickle.

    "I still see between one and four hikes this year. But the reality is that, in terms of growth and economic outlook, we are still searching for the bottom, which is proving deeper than expected.

    "I believe the US recovery may speed up again in the remainder of the year but China will remain a global manufacturing drag."

    Still, 22 blue-chip stocks were lifted higher, with Golden Agri-Resources putting on 1.5 cents or 4.17 per cent to 37.5 cents. Noble Group closed up 0.5 cent or 1.61 per cent to 31.5 cents.

    The two counters were among the most active yesterday, when Golden Agri-Resources saw 40.5 million shares changing hands while Noble had 41.9 million shares transacted.

    Singapore Press Holdings gained seven cents or 1.99 per cent to $3.59. CapitaLand Mall Trust rose two cents or 1 per cent to $2.02 and Ascendas Real Estate Investment Trust closed up one cent or 0.43 per cent at $2.34.

    Singapore Reits will again shine in the current uncertain market where investors seek stable yields, DBS Group Research said.

    "The S-Reits have outperformed the STI so far this year, falling by a smaller 3 per cent compared to the 11 per cent drop in the overall market. Looking ahead, we believe that near-term performance will be firm and largely macro driven," DBS analysts said in a note yesterday.

    Meanwhile, Hutchison Port Holdings Trust dropped one US cent or 2.15 per cent to 45.5 US cents - the top losing blue chip yesterday. Singapore Airlines lost 10 cents or 0.92 per cent to close at $10.82.

    The carrier yesterday announced, after market close, a 35.5 per cent year-on-year rise in net profit for the three months to Dec 31 when weak fuel prices helped buffer its earnings.