Market tumble an overreaction: DBS

Market tumble an overreaction: DBS

SINGAPORE - The tumble in global stock markets amid hints of a slowdown in US money printing has been an "overreaction", said Mr Lim Say Boon, chief investment officer for group wealth management at DBS Bank.

He noted that the timing for the United States Federal Reserve to start slowing down its money printing depends on US economic data, which "continues to be patchy", and that the Fed is still far from raising its policy interest rate.

In response to the global financial crisis, the Fed set its policy rate close to zero, and started massive money-printing programmes, known as quantitative easing, to kick-start the country's moribund economy.

The Fed hinted on May 22 that the printing presses could soon slow down. However, interest rates are expected to continue to remain very low.

"A tapering of quantitative easing is akin to easing off the foot from the accelerator pedal, if I can use a driving analogy," said Mr Lim.

Depressing the foot on the brake pedal in this case would equate monetary tightening, when interest rates start to go up.

So while the money printing may soon slow down, "it is not analogous to depressing the foot on the brake pedal" as rates will remain low.

Mr Lim said that the market may be putting too much emphasis on, or "overpricing", the timing of a rise in interest rates.

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