STI jumps on positive reaction to Fed's hike
SINGAPORE shares rose in line with the rest of Asia after investors took the widely expected first United States interest rate hike in nearly a decade as a positive sign.
Investors believe the Federal Reserve's move indicates that the world's largest economy has become strong enough to withstand higher borrowing costs.
The Fed raised interest rates by 0.25 percentage points - its first rise since 2006 - taking the the Federal Funds rate, or the rate range within which banks offer to lend to each other overnight, to between 0.25 per cent and 0.5 per cent.
"It's not really a big deal because the move was long expected, and already priced in by the market," remisier Alvin Yong said.
The Straits Times Index rose 20.26 points or 0.71 per cent to 2,861.18, led by gains in the local banks and Singtel.
OCBC Bank climbed 0.9 per cent or 8 cents to $8.73, United Overseas Bank edged up 0.2 per cent or three cents to $19.11, and DBS Group Holdings added 0.5 per cent or eight cents to $16.59. Singtel rose 0.5 per cent or two cents to $3.78 on 33.8 million shares traded.
Banks were buoyed by the rate hike move, as their net interest margins are expected to improve. But a potentially flat economy might limit loans growth to the mid-single digits at best, said Kelvin Tay, regional chief investment officer at UBS Wealth Management.
"The general economic malaise in the region could perhaps affect the non-performing loans negatively too, especially for banks with greater exposure to Malaysia, Thailand and Indonesia," he warned.
"Asset quality concerns are likely to linger, as there appears to be a wide gap in terms of market perception and bank managements' confidence in the asset quality of their loan books," Mr Tay said.
Addvalue Technologies was the most actively traded counter, surging 20.5 per cent or 0.8 cent to 4.7 cents on 43.6 million shares done.
The firm announced the successful launch on Wednesday of its data relay terminal into low-earth orbit on the Velox-II satellite by an Indian rocket. The satellite, built by Nanyang Technological University under a contract with Addvalue, carries the firm's data relay terminal as its primary payload, and is among six Singapore-made satellites launched on Wednesday, marking Singapore's boldest leap into space.
The commodities slump following the Fed move weighed on Golden Agri-Resources, which fell 1.5 per cent or 0.5 cent to 32 cents on 35.1 million shares done.
Oil-related counters took a hit as oil plunged on the global supply glut. Rex International slipped 3.4 per cent or 0.3 cent to 8.5 cents, with 19.5 million shares traded; Ezion dipped 0.8 per cent or 0.5 cent to 59.5 cents, with 13.4 million shares traded. Loyz Energy fell 3.6 per cent or 0.2 cent to 5.4 cents, with 11.1 million shares traded.