Singapore shares close 0.5% higher on rate cut hopes

DOVISH comments from two top Federal Reserve officials sent markets soaring on Friday, as investors hope for a rate cut as large as 50 basis points later this month.

The Straits Times Index (STI) finished on a high after making muted gains earlier in the week, gaining 0.5 per cent or 16.91 points to close at 3,377.96.

Other Asian markets that performed well included Japan, where the Nikkei index added 2 per cent, and South Korea, where the KOSPI index gained 1.35 per cent.

The rally was driven in part by a Thursday speech from New York Fed president John Williams, who is also vice-chairman of the Federal Open Market Committee. He said that his estimate of the US neutral rate is around 0.5 per cent, and added that "it's better to take preventative measures than to wait for disaster to unfold".

Although the New York Fed later clarified that Mr Williams' speech was about research findings and not potential policy actions, the dovish tone was reinforced later the same day by Fed vice-chairman Richard Clarida. He said in a television interview: "You don't have to wait until things get so bad to have a dramatic series of rate cuts. You don't want to wait until data turns decisively if you can afford to."

Turnover on the local bourse was 1.48 billion securities worth S$1.11 billion, which worked out to an average unit price of S$0.75. Gainers outnumbered losers 244 to 168, or three securities up for every two down.

Libra Group led active counters with a volume of 74.1 million, gaining 2.5 Singapore cents or 92.6 per cent to close at S$0.052.

Other active counters included Genting Singapore, which ended flat at S$0.92 with 19.6 million shares traded, and SATS Ltd, down 6.02 per cent or 32 Singapore cents to S$5.00 on a volume of 14.05 million.

The airport and food services provider posted a 14.4 per cent drop in Q1 net profit on Thursday, citing the weak global economy as a key factor for its performance.