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Nikkei Markets

Malaysia, Singapore shares slip as banks retreat further

Capital outflow concerns persist ahead of Fed rate decision

KUALA LUMPUR (Nikkei Markets) - Singapore and Malaysia shares slipped Wednesday amid persistent selldown in heavyweight financial stocks ahead of a widely-expected increase in interest rates by the U.S. Federal Reserve.

The Straits Times Index fell 1.1% to 3392.51, while the FBM KLCI ended a tad lower at 1763.57. The Malaysian stock exchange will be shut after the morning session Thursday for Eid. Singapore's market will remain open Thursday, but close on Friday. Trading in both markets will resume Monday.

"The Fed is almost certain to hike with headline inflation running at an annual rate of 2.8%, and core inflation at 2.2%," said Michael McCarthy, chief market strategist at broker CMC Markets. "Market pricing indicates traders are split between a total of three or four interest rate rises this year."

Most equity benchmarks in Asia also edged lower on Wednesday, with the Nikkei Asia300 Index slipping 0.7% ahead of the Fed monetary policy decision due 2.00am Singapore time.

Economists expect the Fed to raise funds rate ceiling by 25 basis points, or 0.25 percentage-point, to 2% as U.S. economic growth and inflation accelerates. Recent payrolls data also suggest that the expansion of world's largest economy remain robust.

An increase in U.S. interest rates generally spell reversal of funds from emerging markets as investors shift from riskier assets that provide higher returns back to the U.S. due to the narrowing gap. Severe capital outflow could also weaken currencies and disrupt financial markets.

"I believe some foreign funds have switched to Indonesian banks as the new central bank governor has taken decisive steps to raise rates a couple of times," said Tushar Mohata, an analyst at Nomura Securities.

Singapore's three largest banks, DBS Group Holdings, Oversea-Chinese Banking Corporation, and United Overseas Bank fell 1.1%, 1.9% and 2.7%. Public Bank - which has the largest weightage on the KLCI, dropped 0.9%, while mid-sized rival RHB Bank lost 0.8%.

Oil prices fell on reports of an expected relaxation of OPEC output cuts, coupled with higher U.S. supply. Singapore-based rigbuilder Keppel Corp. dropped 2.1%, while Malaysian oil-and-gas company Sapura Energy lost 3%.

Environmental solutions provider CITIC Envirotech rose 2.7% after saying it had secured two industrial hazardous waste treatment projects in China that would cost 680 million yuan ($106.16 million).

In Malaysia, technology company Comintel Corp. plunged 12.8% after saying it was served with a statutory demand by U Television, for claims totaling 20.83 million ringgit.

Bermaz Auto, which distributes vehicles and spare parts distributor for Japanese automaker Mazda, rose 2.2%. Fiscal fourth-quarter net profit had surged almost three times helped by better margins, the company said late Tuesday.

Jewellery retailer Poh Kong Holdings fell 3.9% after reporting a 41.8% drop in net profit for the fiscal third quarter, as fluctuations in gold prices eroded its profitability.

- Alexander Winifred

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