Mar 16, 2016

    Traders get cold feet ahead of Fed meet

    MOST Asian markets retreated yesterday as sentiment turned cautious ahead of a United States Federal Reserve interest rate meeting while oil prices showed renewed signs of weakening.

    This sort of volatility will likely be the norm this year, market watchers told The Straits Times. Investors should not be too hasty in expecting a full recovery, they added.

    Singapore's benchmark Straits Times Index pared 7.62 points or 0.27 per cent to 2,839.44, snapping a two-day gain. Across the whole market, 1.77 billion shares worth $848.5 million changed hands.

    The drop here came in tandem with the regional slide. Tokyo lost 0.68 per cent, as investors were disappointed by the Bank of Japan's decision to keep its monetary policy unchanged after its March meeting.

    Hong Kong shed 0.72 per cent while Kuala Lumpur was down by 0.55 per cent. Shanghai managed to put on 0.17 per cent, saved by a late surge after a weak early showing.

    Overnight, the Dow Jones Industrial Average added just 0.09 per cent, as investors took their money off the table to wait for more clarity on the Fed meeting outcome.

    The same concern is also at play here, remisier Desmond Leong said, adding: "While a rate hike announcement is not expected, people still don't fancy taking their chances, so now they're waiting on the side to wait and see.

    "But a correction should not be surprising after over two weeks of rebound. It won't be easy for the STI to retake the 2,890 level before the January crash. Overall, this year is still going to be volatile and it's unlikely that we will have a full recovery any time soon."

    In the meantime, only nine of the 30 STI constituents rose yesterday. Singtel led the way, rising two cents or 0.53 per cent to $3.82.

    Singapore Airlines put on six cents or 0.53 per cent to $11.41 while SIA Engineering closed up two cents or 0.56 per cent at $3.58.

    The top losing blue chip yesterday was OCBC Bank, down six cents or 0.67 per cent to $8.89, as investors took profit after the counter topped the STI with its gain on Monday.

    Keppel Corp dropped 11 cents or 1.82 per cent to $5.93, and Sembcorp Marine pared 3.5 cents or 2.04 per cent to $1.68, just as crude oil benchmark Brent futures slid further to below US$39 per barrel.

    The renewed questions over the strength of oil prices means oil and gas firms could face more pressure.

    "The recent rally of the oil and gas stocks could be short-lived in the absence of meaningful change in fundamentals. A near-term pull-back in oil prices is likely, as talks of output freeze may have hit a roadblock with Iran's resistance to take part and refineries entering their maintenance period in April," DBS analysts said in a note yesterday.

    More impairments may hit sectoral firms this year, DBS added, noting Keppel could be under pressure to make provisions of up to $200 million for non-Sete Brasil projects.

    Ezra Holdings, which was yesterday's top active counter with 261.2 million shares traded, has made no provisions so far. But impairments may be unavoidable this year as oil price woes continue.

    It slid half a cent or 4.24 per cent to 11.3 cents.