SINGAPORE stocks rallied on Monday (Sep 23), as regional markets posted mixed results.
The Straits Times Index (STI) was up 0.38 per cent or 13.78 points at 3,638.54, which was a 17-year high.
Across the broader market, decliners slightly edged out advancers 289 to 286, after 1.1 billion shares worth S$1.2 billion changed hands.
On the STI, Mapletree Industrial Trust was the biggest gainer, closing up 1.6 per cent or S$0.04 at S$2.49 on Monday.
The trio of local banks were the next top gainers, hitting new highs. DBS led the way, rising 1.2 per cent or S$0.46 to S$39.46, followed by OCBC up 1.1 per cent or S$0.17 at S$15.64, while UOB gained 0.9 per cent or S$0.31 to end at S$33.25.
The biggest loser was DFI International, closing down 3.1 per cent or US$0.06 at US$1.86.
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Across the region, major indices had mixed results. South Korea’s Kospi gained 0.3 per cent and Japan’s Nikkei 225 rose 1.5 per cent, while Hong Kong’s Hang Seng Index was down 0.06 per cent.
Vishnu Varathan, head of macro research at Mizuho Securities, noted that markets are facing a “cold-ilocks” conundrum, where a missed soft landing could have a chilling effect. There is a two-pronged risk of either the US Federal Reserve failing to deliver rate cuts or easing as the markets have convinced themselves, or the markets getting cold feet on the soft-landing assumptions due to recession-type risks that supplant relief from rate cuts.
Both risks are not mutually exclusive, with the Fed getting cold feet in delivering rate cuts leading to markets getting cold feet on a soft landing. The rally from the Fed rate cuts are not without tensions, noted Varathan.
“Some bumpiness in US Treasury yields, a short squeeze in the US dollar and wobbles in equities may as such be par for the course,” he said.
An upshot to the rate cuts has been the flexibility given to Asian emerging markets’ monetary policy, allowing central banks to embark on an easing cycle. But the cuts are unlikely to match the Fed rate cuts, as central banks in the region lagged the rate hikes and will thus struggle to follow the cuts.
Coupled with financial stability concerns of elevated debt and frothy asset markets, central banks in Asia will be constrained in making cuts.
In fact, understated latent foreign-exchange risks for emerging markets in Asia could be a reason to be more measured with the pace of rate cuts, added Varathan.
