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Fed Leaves Rates Unchanged “AGAIN”
Perspective | 18 September 2015
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By:

This is beginning to sound like an old record that keeps playing. “The Fed has left interest rates unchanged; AGAIN.”

In the article seen yesterday, we analysed the past tones of the members crucial to the decision. True, we have seen our fair share of mixed tones within the panel itself, but the underlying tone of the unchanged rate, really, suggests buying more time instead.

Despite a strong display of job data showing US employment rate falling to 5.1 percent, the lowest level since April 2008, concerns over the health of the global economy, sluggish inflation in the US as well as a lacklustre demand in the housing market spurred inaction from the Fed.

With the conclusion of the September meeting, the next bet is on when the Fed will make the move to hike rate for the first time in more than six years.

Although Fed chairwoman Janet Yellen said that a October hike is not off the books, for now though, Wall Street is eyeing a hike December, according to a Reuters poll.

After a choppy session, the US markets ended down, led by declines in financial stocks.

In Asia, market reactions are mixed on the Fed’s inaction.

Of the major markets, Australia, China and Hong Kong were up, while Japan was down.

Zooming in on the local market in Singapore, the Straits Times Index (STI) was up approximately 0.7 percent as at the time of this writing (12pm). Most of the 30 components stocks are in the green (gains) with the exception of five – DBS Group (DBS), United Overseas Bank (UOB), Olam International, Jardine Matheson Holdings and Jardine Strategic Holdings.

DBS and UOB are in the red (losses) as a rate hike was expected to boost earnings for banks. The remaining three stocks are those that will removed from the STI come 21 September, possibly a reason for the price decline.

The delay in rate hike proved to be a boon for real estate investment trusts, as the FTSE ST Real Estate Investment Trust Index climbed more than 2 percent, with all of its constituents registering gains.

While the markets seem to be taking a temporary breather from the recent stock rout and the rate hike suspense, would this rally prove to be ephemeral?

Investors are advised to tread carefully in the current volatile markets. China’s slowing growth will remain as a major overhang, while the US rate hike guessing game will likely repeat itself closer to the official meeting dates of Fed officials in October and December.

Would we finally see a rate hike, or will it be the Fed who cried wolf all over again?

DBS Group Hldgs  24.840 +0.45 +1.85%   
Business: [FY16 Turnover] Institutional banking (45.4%), consumer banking/wealth management (37.2%), treasury (9.9%), others (7.5%).

Insight: Nov-17, 9M17 net profit decreased by 4.5% as reven... Read More
United Overseas Bank  25.770 -0.02 -0.08%   
Business: [FY16 Turnover] Group retail (45.2%), group wholesale (44%), global markets & investment management (6.4%), others (4.4%).

Insight: Nov-17, 9M17 net profit increased 7.6% to $2.5b as... Read More
Olam Int'l  2.200 -- --   
Business: Co is engaged in sourcing, processing, packaging and merchandising agricultural products. [FY16 Turnover] Confectionery & beverage ingredients (37.5%), food staples & packaged foods (29.7%), edible nuts, spices & vegetable ingredients (19.3%), industrial raw materials, ag logistics & infrastructure (13.5%).

Insight: Aug-17, 1H17 revenue rose 26.5% mainly on higher s... Read More
Jardine Matheson Hldgs  64.610 -0.94 -1.43%   
Business: [FY16 Turnover] Astra (36.7%), Dairy Farm (30.2%),Jardine Motors (14%) Jardine Pacific (6.4%) Jardine Cycle & Carriage (5.8%), HK Land (5.4%), Mandarin Oriental (1.5%).

Insight: Aug-17, 1H17 revenue rose 7.8% with good performan... Read More
Jardine Strategic Hldgs  42.940 -0.73 -1.67%   
Business: [FY16 Turnover] Astra (46.1%), Dairy Farm (37.9%), Jardine Cycle & Carriage (7.3%), HK land (6.7%), Mandarin Oriental (2%).

Insight: Aug-17, 1H17 revenue climbed 8.9% benefiting from ... Read More


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