Singapore shares fall on week after Fed move, lenders lift Malaysian equities
SINGAPORE (Nikkei Markets) -- Singapore stocks fell this week after the U.S. Federal Reserve maintained its projection for a third rate increase in 2017 and outlined plans to reduce its bond holdings.
Banking heavyweights helped the Malaysian benchmark squeeze out a small gain for the week.
Singapore's FTSE Straits Times Index ended little changed at 3,231.44 on Friday, ending the week 0.7% lower. This week's losses came mainly from Thursday's decline after the Fed's move drove losses in the city-state's lenders and property developers.
Most other regional indexes also fell after the U.S. central bank delivered a widely-expected 25-basis-point rate increase and kept its forecast for another hike this year. This week's increase was widely expected, but investors were hoping for lowered projections for future hikes as the world's largest economy grapples with political uncertainty and mixed datasets. The Fed also laid out a plan to shrink its balance sheet. The Nikkei Asia300 Index was down about 0.9% this week, heading for its first weekly loss since April.
"Markets were surprised by the hawkishness in the policy statement and Chair Janet Yellen's press conference," Hussein Sayed, Chief Market Strategist at FXTM, said in an e-mail. "Although the date (for balance sheet normalization) has not been specified, there's a very high chance the process will start in September."
Borrowing costs in Singapore are largely determined by moves in U.S. interest rates as the city-state's central bank uses the exchange rate to guide monetary policy instead of interest rates. Banking stocks were the biggest contributors to the week's decline as the U.S. bond yield curve flattened following the Fed's decision and a softer-than-expected U.S. inflation print. A flatter yield curve weighs on banks' margins.
City Developments paced declines among interest-rate sensitive developers, falling 3.1% in the five-day period. On Friday, City Developments fell 0.2%.
Rig builder Keppel Corp. fell 1.6% this week as Brent crude prices were poised for a fourth consecutive weekly decline. The stock was unchanged at S$6.31 on Friday.
Singapore's non-oil domestic exports fell for second straight month in May as weakness in sectors such as pharmaceuticals continued to be a drag on the economy, data released Friday showed. The city-state's non-oil domestic exports fell 1.2% in May from a year ago, despite another strong performance by the electronics sector, which saw shipments surge 23.3%.
The FTSE Bursa Malaysia KLCI rose 0.1% to 1,791.31 on Friday, helping it clinch its fourth consecutive weekly advance. CIMB Group Holdings added 1.5% and Hong Leong Bank rose by 2.8%. Heavyweight Malayan Banking advanced 0.6% since last Friday. The index rose 0.1% for the week.
CIMB is up for a ninth consecutive week and has paced a strong rally in financial stocks this year amid expectations that bank earnings will get a boost from higher economic growth and hopes the worst of the write-downs on account of non-performing loans is now over. CIMB edged 0.4% lower on Friday and Maybank slipped 0.1%, while Hong Leong Bank rose 1.4%.
Astro Malaysia Holdings was the best performer this week, rallying 5.2% amid expectations that a stronger ringgit will help it control costs on overseas content. Earlier this week, the television services provider reported a 3.1% decline in net profits for the fiscal first quarter.
--Nimesh Vora and Kevin Lim