Dec 20, 2013

    ST Index up on news of US tapering

    SOME traders feared a market meltdown would ignite across the region when the United States central bank said it would reduce its money-printing policy, but it was far from that yesterday.

    Hong Kong lost 1.1 per cent and Shanghai fell 0.95 per cent, but Sydney shares jumped 2.08 per cent.

    Tokyo's Nikkei 225 rose 1.74 per cent to its highest close in six years, as the yen weakened against the US dollar - a development that will boost Japanese exports.

    Singapore's benchmark Straits Times Index inched up 8.45 points, or 0.3 per cent, to 3,070.23.

    Analysts said investors had mostly priced in the cut in US bond purchases, especially as the idea had been bandied around by the Federal Reserve since May.

    The decision, the first sign that five years of easy money is coming to an end, also removed uncertainty hanging over the markets.

    The Fed will cut its US$85 billion (S$107 billion) of monthly bond purchases to US$75 billion, a reduction known as "tapering".

    Fed chairman Ben Bernanke "delivered an early Christmas present by removing taper uncertainties", said Ms Selena Ling, head of treasury research and strategy at OCBC Bank.

    Mr Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors, noted the Fed highlighted that interest-rate hikes are still a long way off and dependent on the US economy.

    He said: "Fed policy remains market-friendly and generally supportive of further gains in shares."

    The STI's gainers included DBS Group Holdings, up 10 cents, or 0.6 per cent, to S$16.59, after Barclays Research upgraded the stock to "overweight" from "equal weight".

    Barclays now values DBS at S$19, up from S$16.50 previously.

    It likes DBS' "strong deposit franchise" and "inexpensive valuations", and said the company has the potential to raise its dividends.

    But SingTel fell seven cents, or 1.95 per cent, to S$3.52. The stock went "ex-dividend" yesterday, trading without its latest payout of 6.8 cents per share.

    Smaller counters were little changed. The FTSE ST Mid Cap Index inched up by 0.01 per cent, while the FTSE ST Small Cap Index was higher by 0.22 per cent.

    Mermaid Maritime Public Company increased half a cent, or 1.1 per cent, to 47.5 cents. It said after Wednesday's market close that it had won a US$32-million contract for work in the Gulf of Thailand.

    This is the ninth year that Mermaid has secured this role, and the deal had been included in the firm's previously announced total order book.