Dec 13, 2013

    STI tumble is longest since August

    FEARS that the scaling back of the huge United States money-printing programme is imminent yesterday drove Asian markets to their lowest levels since Oct 1.

    As investors abandoned any hopes of Christmas cheer, Tokyo's bourse fell 1.1 per cent, Hong Kong's slid 0.5 per cent and Seoul's lost 0.5 per cent.

    Singapore's got off lightly by comparison, but still edged down 0.06 per cent. The benchmark Straits Times Index (STI) had been lower by as much as 1.2 per cent in the morning, before clawing back almost all its losses.

    Still, the decline by 1.7 points to 3,059.04 meant the STI has notched up an eight-session losing streak and is at its lowest level since early September.

    It is the index's longest losing run since August.

    A United States government-budget deal on Tuesday led to heightened speculation that the Federal Reserve would announce a reduction in its US$85 billion (S$106 billion) per month of asset purchases next Wednesday, at the conclusion of its December policy meeting.

    After all, when the Fed decided in September to keep this programme unchanged, it cited, as a reason, the budget battles due to take place in Congress. With progress on this front, there is one fewer obstacle for the Fed.

    US economic data has also been strong. Notably, unemployment fell to 7 per cent last month - its lowest level in five years - and employers hired 203,000.

    "The provisional budget deal struck in Washington has prompted some analysts and fund managers to bring forward expectations of an early paring down of the stimulus," said CMC Markets analyst Kenny Kan.

    "These are heightened expectations which may not actually come to pass. However, it brings us back to the fact that people don't want interest-rate risk."

    He noted that when the asset purchases are cut, there will likely be a spike in US dollar-linked yields, such as US government and corporate bonds.

    In Singapore, volumes remained weak at only 1.87 billion shares worth $951 million. The most active counter was Charisma Energy Services, which was flat at 6.4 cents at 341 million units traded.

    Global Premium Hotels slipped half a cent, or 2 per cent, to 24.5 cents.

    OCBC Investment Research yesterday highlighted the stock as its top pick in the Singapore hospitality sector. It values Global Premium Hotels at 33 cents and said the upcoming opening of its second mid-tier hotel, Parc Sovereign Hotel in Tyrwhitt Road, could boost profit by about 17 per cent next year.

    OCBC is "neutral" on the hospitality sector.