STI bounces back but may stay rangebound

Local shares rebounded yesterday as traders squared positions ahead of a United States Federal Reserve meeting expected to signal a slow pace of interest rate increases.

The Straits Times Index rallied as much as 46.95 points, or 1.4 per cent in afternoon trade, before closing at 3,325.91, up 27.82 points or 0.8 per cent.

Financials led the charge: DBS Bank climbed 1.2 per cent or 24 cents to $20.78; United Overseas Bank rose 0.8 per cent or 19 cents to $22.99; and OCBC Bank gained 1.4 per cent or 14 cents to $10.13.

"Today's rebound was mostly across the board, as over 75 per cent of the STI components chalked up gains," IG market strategist Bernard Aw said.

"Despite the bounce, the reality is that STI remains largely within the recent consolidation band of 3,300-3,350. Attempts to break either side of the range were not sustained."

Most of Asia, except Japan, enjoyed a relief rally yesterday.

Chinese equities shrugged off the bears and rebounded as traders bought into banks, energy and utility counters on prospects for accelerated reforms in the state-owned enterprises sector.

Shanghai was up 1.7 per cent, Shenzhen surged 1.98 per cent, Hong Kong was up 0.7 per cent and South Korea rose 0.3 per cent.

The Hang Seng China Enterprises Index in Hong Kong was up 1.2 per cent.

A slew of share buybacks since June 9 has helped prop up Genting Singapore, one of the most actively traded stocks yesterday.

The casino operator jumped 2.7 per cent or 2.5 cents to 93.5 cents, with 39.1 million shares traded.

Noble Group was the most actively traded, ending down 0.7 per cent or 0.5 cent, to 71.5 cents, with 73.5 million shares traded.

The company yesterday engaged in a war of words with former Temasek senior managing director Michael Dee after he pressed its management to answer questions about the company.

Meanwhile, Singapore Airlines rebounded 1.3 per cent or 14 cents to $10.56 as concerns about the effects of a possible spread of the Middle East respiratory syndrome (Mers) appeared to be "overblown".

DBS Vickers Securities maintained a buy call on SIA, saying potential cost savings from cheaper fuel will boost the carrier's profitability, particularly from the second quarter next year.

Market participants remain focused on the US Fed meeting early today Singapore time for clues on when the central bank could start raising interest rates.

"We noted that 80 per cent of the time, markets tend to rally when Federal Reserve Chair Janet Yellen gives a press conference," Mr Aw said.

"I feel the Fed will take the June meeting as an opportunity to prepare the ground for a late rate hike (in the third or fourth quarter). This should support the consensus' case for a September move."

gleong@sph.com.sg

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