As of September 17, 2024, the Singapore stock market is poised for a potential boost as the Federal Reserve prepares to cut interest rates for the first time since March 2022. Analysts predict that easing high Fed rates, currently set between 5.25% and 5.5%, could lead to a rally in Singapore stocks. Historical data from CGS International suggests that Singapore's market has benefited from initial rate easing in previous cycles, notably in 2007 and 2019. [f85429fc]
The anticipation of a rate cut has led to a 69% chance of a 25-basis-point reduction during the Fed meeting scheduled for September 17-18, 2024. OCBC Investment Research also expects a cut to be announced on September 18. This shift in monetary policy is expected to lower funding costs, potentially resulting in earnings growth for companies, particularly in the S-Reits sector. [f85429fc]
Currently, the Singapore market is trading at a price-to-earnings ratio of 12.7, with a dividend yield of 4.7%. Investors are advised to focus on favored stocks such as CapitaLand Ascendas Reit, ComfortDelGro, ST Engineering, and Singtel, which are expected to perform well in a lower interest rate environment. [f85429fc]
Despite the optimistic outlook, market volatility may persist due to uncertainties surrounding the upcoming US presidential election and ongoing geopolitical tensions. This cautious sentiment follows a recent soft start for the Singapore stock market, where the Straits Times Index (STI) closed at 3,454.47 on September 9, 2024, reflecting broader global economic concerns. [10f3a86b]
The STI had previously gained nearly 90 points over a four-day winning streak but faced declines as major US indices reported significant losses, with the NASDAQ experiencing a 5.8% decline over the week. Oil prices also hit an 18-month low, trading at $67.67 per barrel, adding to the cautious outlook for global markets. [10f3a86b]