Sep 16, 2014

    STI bleeding on fears of US rate hike

    FEARS of interest rate hikes in the United States, concern over the Scottish referendum and signs of a slowdown in China belted shares yesterday.

    It was a sea of red throughout the trading session with the Straits Times Index (STI) falling early and dropping at a faster pace near the end of the day.

    The index ended 33.08 points or 1 per cent lower at 3,312.47, which was also the intra-day low. There were 326 losers and 95 winners in the overall market.

    Trading was soft with 1.33 billion shares worth a total of $870.1 million traded.

    A key reason for the sell-off was the uncertainty surrounding the US Federal Reserve meeting today and tomorrow.

    Data out last week showing that US retail sales had expanded at the fastest pace in four months underscored the country's recovery story and bolstered analyst expectations that the Fed will start lifting rock-bottom interest rates - a decision that could undermine the global share rally.

    A Bank of Singapore report yesterday was positive on equities but warned of the prospects of tightening US policy.

    Sean Quek, its head of equity research, said: "Investors need to be more discerning, especially in view of the extended market rally and expanded risk appetite, and look to buy on pullback."

    The Scotland independence referendum on Thursday has raised fears that a breakaway could endanger the country's and Europe's recovery.

    If investors needed more reasons to get out of the market, they got it over the weekend when China reported that industrial output last month grew at 6.9 per cent, the lowest level since December 2008.

    Banks, which have been lending support to the local market, were among the big losers yesterday. DBS fell 24 cents or 1.3 per cent to $18.28, OCBC dropped 10 cents or 1 per cent to $9.67 while United Overseas Bank declined 24 cents or 1 per cent to $22.80.

    Property developers also had a disappointing day on news that the sales of new private homes last month was 432 units, the lowest level this year.

    CapitaLand lost seven cents to $3.22, City Developments decreased 12 cents to $9.74 and Keppel Land dipped three cents to $3.43.

    But SembCorp Industries bucked the trend, rising two cents or 0.4 per cent to $5.20, as it announced yesterday an agreement to expand its energy business in China, investing in two power plants in Chongqing.