Sep 14, 2015

    Traders await Fed meet as STI languishes

    TRADERS are likely to be kept on edge this week, with United States officials set to announce plans on the impending interest-rate hike.

    The jitters will feel like business as usual, given the volatility that racked markets last week.

    There was some hint on Friday as to what might come, when Wall Street edged up 0.63 per cent following a rocky session, leaving it up 2 per cent for the week. But all hinges on the Federal Reserve meeting on Wednesday and Thursday.

    "It's really Fed watch. That's what traders are waiting for," said Tim Ghriskey, chief investment officer of Solaris Group in New York, in a Reuters report.

    "There's speculation the Fed might hold off, and if they do, I think we'll see stocks rally," he said. "But to us, it's not a question of if the Fed raises rates, but when. It's going to happen."

    Fed chairman Janet Yellen has said the US will deliver a rate hike when it sees a sustained economic recovery, especially in the job market, but without giving a clear indication of when this will happen.

    Last week was a mixed bag for regional stocks, as the focus shifted from China - where the government unveiled a series of measures aimed at reassuring investors and shoring up its slowing economy - back to the Fed's rate decision.

    At home, the benchmark Straits Times Index (STI) dropped 40.15 points, or 1.37 per cent, to 2,888.03 on Thursday, before the market was closed for the election.

    It was up 24.22 points or 0.8 per cent for the week.

    "People will continue to look to the Federal Reserve meeting for more insight on when it will raise interest rates," remisier Desmond Leong told The Straits Times.

    But the movement here will likely be confined to the blue chips, he added.

    "Recently the Singapore market has been relatively quiet - the pennies are almost dead and the only things that are active are the blue chips," noted Mr Leong.

    "It does feel that the market has gone into a lethargic state, with less volatility and less participation. I'd expect the weak sentiment to carry on into this week."

    Mr Leong said the three local banks could be subject to some notable movement before the Fed meeting takes place.

    "The banks are expecting the raise, given that Sibor rates have been increasing bit by bit," he said.

    "Once the US does that, it would benefit the banks. Sibor rates will continue to increase and this will flow down to fixed deposits and the retail end."