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Singapore, Malaysia equities fall ahead of Fed policy review

Banks among the biggest losers on STI, KLCI indices

KUALA LUMPUR (Nikkei Markets) -- Singapore and Malaysian stocks fell Tuesday, with banks contributing the most to the losses, ahead of the U.S. Federal Reserve's policy meeting.

Most Asian equities slipped Tuesday. The Nikkei Asia300 Index dropped 0.3% as investors' focus turned to the Fed's two-day policy meeting that starts later Tuesday.

Market participants are awaiting the authority's comments on inflation expectations and growth prospects, the economic impact of hurricanes Harvey and Irma, and the possibility of one more rate increase before the end of the year. They are also waiting to see if the central bank announces a timeline for the reduction of its bond holdings. The outcome of the meeting will be known after Asian markets close on Wednesday.

"The focus will be on the dots and economic forecasts in the Summary of Economic Projections (SEP), as well as the tone from the statement and press conference," Bank of America Merrill Lynch said in a note. "We do not expect the dots to move, maintaining the expectation of three hikes this year (December hike)."

Singapore's FTSE Straits Times index lost 0.5% to close at 3,225.95. Banks, the previous day's best performers, were the biggest losers on Tuesday. Oversea-Chinese Banking Corp. declined 1%, United Overseas Bank lost 0.8%, and DBS Group Holdings dropped 0.6%.

Transport operator ComfortDelGro slumped 2.9% to a more-than-three-year low, extending Monday's losses, after its unit unexpectedly lost a bid to manage a part of Singapore's train network.

Sembcorp Marine climbed 2.5% to S$1.67 after its unit signed a letter of intent with SeaOne Caribbean for the design and construction of two large Compressed Gas Liquid carriers. CIMB said the contract is likely to be materialized by the end of the fiscal year 2017 or early 2018. The brokerage has an `add' rating on the stock with a target price of S$1.87.

The FTSE Bursa Malaysia KLCI declined 0.4% to 1,776.66. CIMB Group Holdings, down 3.4%, was the day's biggest loser. AMMB Holdings dropped 0.4%.

"Our outlook for the index remains neutral in short term as we expect further consolidation ahead," UOB Kay Hian said in a note. "We expect KLCI to hover around 1,760-1,790 for now with a breach of either limit to spark a follow through."

EcoFirst Consolidated dropped 1.7% after the property developer said Tuesday its unit had been asked to pay 35.47 million ringgit in additional income tax and penalty. On Monday, Malaysia's Inland Revenue Board said it would launch a crackdown on companies that have been previously investigated for not paying tax. It also launched an operation to serve notices on 1,601 cases, seeking to collect 728 million ringgit in unpaid taxes.

T7 Global climbed 2.6% after the engineering services company received two contracts worth a total 7.2 million ringgit ($1.7 million).

Salcon added 2.3% after the water services provider received a pipes replacement contract worth 13.27 million ringgit.

Lii Hen Industries advanced 5.4% 3.49 ringgit. Hong Leong Investment Bank initiated coverage of the furniture maker with a "buy" rating and a target price of 5.04 ringgit. The brokerage projected an increase of 3% to 11% in the company's net profit for fiscal years 2017-2019 because of a new production line and growth in demand in the U.S. market.

KNM Group jumped 6.3% amid expectations that earnings would benefit from the contribution of its Thai renewable energy unit, which commenced production in the third quarter. "We expect Thai operations (phase 1) to contribute 5 million ringgit this year, then 15 million ringgit per annum from 2018," Maybank Investment Bank analyst Liaw Thong Jung said.

Scomi Group jumped as much as 32% to 0.21 ringgit, its highest since April, a day after major shareholder IJM Corp. said it had been approached by investors keen to acquire a stake in the rail and energy services company. Chief Executive Soam Heng Choon told Nikkei Markets in a Sep. 18 interview that though no binding offer had been received so far, IJM may consider disposing its stake in Scomi should an attractive bid comes up.

Malaysian operations and maintenance company Serba Dinamik Holdings advanced 0.9% to 2.23 ringgit after Kenanga Investment Bank started coverage of the stock with an `Outperform' call and a target price of 2.75 ringgit.

--Alexander Winifred and Nimesh Vora

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