Singapore stocks sink after Powell signals higher inflation; STI down 0.7%
The downbeat messaging sent the benchmark Straits Times Index (STI) sliding 0.7 per cent or 26.63 points to 3,894.18. PHOTO: ST FILE
SINGAPORE – Local shares mirrored falls across global markets on June 19 amid concerns about sticky US inflation and growing unease over the escalating tensions in the Middle East.
An air of pessimism set in for the trading day when US Federal Reserve chair Jerome Powell warned that consumers are expected to face higher prices due to the Trump administration's proposed import tariffs. He also dampened hopes about impending interest rate cuts in coming months.
The downbeat messaging sent the benchmark Straits Times Index (STI) sliding 0.7 per cent or 26.63 points to 3,894.18 – its second straight negative session – with losers outpacing gainers 315 to 167 across the broader market on lacklustre trade of 980 million securities worth $933 million.
The STI's top performer was conglomerate Jardine Matheson Holdings, up 0.9 per cent to US$46.26, while brewer Thai Beverage led the laggards, falling 3.2 per cent to 45 cents.
Red ink also washed over the local banks: DBS fell 0.7 per cent to $43.93; OCBC declined 0.3 per cent to $15.99; and UOB closed 0.3 per cent lower at $34.71.
Regional bourses ended mostly lower on the same concerns that were flagged here. Japan's Nikkei 225 fell 1 per cent, Malaysian shares declined 0.7 per cent, the ASX in Australia slipped 0.1 per cent and Hong Kong's Hang Seng tumbled 2 per cent. The Kospi in Seoul managed to buck the trend, adding 0.2 per cent.
Wall Street put on modest gains early in the session overnight but those gains were steadily trimmed back, leaving the three key indexes largely unchanged, although there is rising concern surrounding the security of oil supplies if the Middle East conflict affects shipping in the Strait of Hormuz.
Mr Suan Teck Kin, head of research at UOB Global Economics & Markets Research, said his team is still projecting three 25-basis-point rate cuts in the US – in September, October and December – and two cuts in 2026. THE BUSINESS TIMES
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Straits Times
42 minutes ago
- Straits Times
Singapore's banking hub has a corner where cash is still king
Travelers with cash also avoid the higher exchange rates and foreign transaction fees imposed by many credit cards. PHOTO: ST FILE SINGAPORE - In the heart of Singapore, a financial hub where billions of dollars zip around the world over computer screens in nanoseconds, there's a crowded building where cash still reigns. Six days a week, hundreds of people line up at The Arcade, a narrow, three-story plaza abutting Raffles Place square, to buy and sell hard currency at one of around 30 money changer stalls. All manner of notes can be had in minutes: Singapore dollars for British pounds? Coming right up. Indonesian rupiah for Vietnamese dong? Icelandic króna? Maldivian rufiyaa? No problem. Some 150 currencies are available. 'Cash will remain forever,' said Abdul Haleem, 65, a veteran of the industry whose kiosk sits at the entrance to the The Arcade. The towering offices of global banking giants JPMorgan Chase & Co. and Bank of China are just steps away. The number of licensed money changers in Singapore dropped during the Covid-19 pandemic when many people were unable to travel and retail shops struggled to pay rent. But there are close to 250 physical stalls still operating, and new ones continue to spring up across Singapore. That's even though multi-currency payment apps such as YouTrip, Wise and Revolut have grown in popularity. To understand how so many money changers can survive the digital age, you need to know a bit about Singapore's place in the world. Though it's now among the richest countries – where financial titans from UBS Group to BlackRock manage more than US$4 trillion and billionaires including James Dyson, Ray Dalio and Sergey Brin have set up family offices – the nation remains a shipping and transit hub at its core. Hundreds of vessels anchor in Singapore's harbour each day, many waiting to load and unload cargo at one of the world's busiest ports. For decades, that's made Raffles Place a prime location for money changers, just a few blocks from where the Singapore River empties into the Singapore Strait. Many sailors need to swap cash from their previous locations, and change money for their next destination. 'They get off the boat and come right here,' said Mr Haleem, whose uncle Abdul Gaffoor, now 99, started City Money Changers on the Arcade's ground floor in 1980. Old-world relic Many office workers also come in search of the best exchange rates – which are often better than what banks offer. Mohamed Rafik, 55, a partner at Arcade Money Changers, a stall opposite Haleem's, remains optimistic. His evidence is that there are new licensees entering the industry who wouldn't do it if they couldn't make a living. 'Money changers won't go out of business,' said Mr Rafik, while handling cash and paper receipts on a busy afternoon. Digital payment wallets may seem attractive now, but the companies also have overheads and may try to increase rates in the long run, he predicted. Right now, a thriving tourism industry is driving demand during the June school holidays. Singapore is close to South-east Asian holiday hotspots like Phuket in Thailand, Vietnam's Ha Long Bay and Bali, Indonesia, where cash is still needed to pay for food at street stalls or small restaurants, or to offer tips. Travelers with cash also avoid the higher exchange rates and foreign transaction fees imposed by many credit cards. For Christina Ng, a teacher in her 40s who came to Haleem's stall for Korean won, cash gives a sense of security while traveling. Paying with notes and coins is also a lesson for her three children. 'I want them to learn how to use the cash and do the transaction, so they need to see the physical money,' she said. 'We don't want them to just tap, tap, tap without actually knowing what they're spending on.' The money changers are good leading indicators of travel trends. Whereas demand used to be strongest for US dollars and Malaysian ringgit, the Japanese yen is now most sought-after, along with Korean won and Taiwanese dollars, Mr Haleem said. At the Arcade, the money changers carve out an existence on the fringes of the multi-trillion dollar global foreign-exchange market. Frugality gives them an edge against the financial institutions that occupy the opulent towers surrounding Raffles Place, according to Mr Rafik at Arcade Money Changers. The changers will survive even if digital platforms cut their margins to zero to gain market share, he said. Congregating in one location attracts more customers, but it also pares margins to the bone. Foreign currency bought at a commercial bank can cost 1 per cent to 4 per cent or more once you factor in a poorer exchange rate and transaction fees. At City Money Changers, it's a high-volume, low-margin business where Mr Haleem typically makes fractions of a penny on the dollar in a swap. 'Everybody wants to see the best price so they will shop around,' he said, while taking a break from his tiny kiosk. On the afternoon of June 19, Haleem's stall was selling the US dollar at S$1.2900, versus the S$1.2972 offered by DBS Group Holdings, Singapore's largest bank, on its retail app. The cash exchange rate wasn't as favourable as YouTrip's rate of S$1.2877 per US dollar. With all this cash on hand – some changers can turn over $500,000 a day, he says. Regulators have scrutinized the industry in the past, concerned about the potential for money laundering. In 2016, the Monetary Authority of Singapore (MAS) cited a Raffles Place currency changer, along with other banks, for their roles in the scandal at 1MDB, the Malaysian sovereign wealth fund. The probe revealed inadequate risk management practices at the changer, and failure to identify the beneficial owners of funds. Money changers are now required to conduct customer due diligence measures for cash transactions exceeding $5,000, or for those topping $20,000 where the money is funded from an identifiable source like a bank account. That includes verifying customers' identities and keeping proper transaction records. The industry poses a 'moderate level' of money-laundering threats due to its cash-intensive nature, said an MAS spokesperson. Mr Haleem, who's been at this trade for 40 years, concedes that the future isn't all bright for his industry. Business is about half that of pre-Covid levels, and the increased competition is eroding margins, while wild currency swings can leave him sitting on devalued cash overnight. He predicts the trend toward digital payments is only going to accelerate. 'It will become worse and worse,' he said, though he thinks there will always be a little room in people's wallets for cold hard cash. One floor up at Crown Exchange, Thamim A.K., a money changer in his 60s, is more sanguine. Sitting in a backroom surrounded by wads of Korean won and Indonesian rupiah, he says his 40 years of trading, with all its ups and downs, gives him hope for the future. 'I've seen everything, all the currencies, fluctuations,' Mr Thamim said. 'The bank notes business is still there. It's growing, in fact. It's fighting with digital.' BLOOMBERG Join ST's WhatsApp Channel and get the latest news and must-reads.
Straits Times
13 hours ago
- Straits Times
Singapore stocks sink after Powell signals higher inflation; STI down 0.7%
The downbeat messaging sent the benchmark Straits Times Index (STI) sliding 0.7 per cent or 26.63 points to 3,894.18. PHOTO: ST FILE SINGAPORE – Local shares mirrored falls across global markets on June 19 amid concerns about sticky US inflation and growing unease over the escalating tensions in the Middle East. An air of pessimism set in for the trading day when US Federal Reserve chair Jerome Powell warned that consumers are expected to face higher prices due to the Trump administration's proposed import tariffs. He also dampened hopes about impending interest rate cuts in coming months. The downbeat messaging sent the benchmark Straits Times Index (STI) sliding 0.7 per cent or 26.63 points to 3,894.18 – its second straight negative session – with losers outpacing gainers 315 to 167 across the broader market on lacklustre trade of 980 million securities worth $933 million. The STI's top performer was conglomerate Jardine Matheson Holdings, up 0.9 per cent to US$46.26, while brewer Thai Beverage led the laggards, falling 3.2 per cent to 45 cents. Red ink also washed over the local banks: DBS fell 0.7 per cent to $43.93; OCBC declined 0.3 per cent to $15.99; and UOB closed 0.3 per cent lower at $34.71. Regional bourses ended mostly lower on the same concerns that were flagged here. Japan's Nikkei 225 fell 1 per cent, Malaysian shares declined 0.7 per cent, the ASX in Australia slipped 0.1 per cent and Hong Kong's Hang Seng tumbled 2 per cent. The Kospi in Seoul managed to buck the trend, adding 0.2 per cent. Wall Street put on modest gains early in the session overnight but those gains were steadily trimmed back, leaving the three key indexes largely unchanged, although there is rising concern surrounding the security of oil supplies if the Middle East conflict affects shipping in the Strait of Hormuz. Mr Suan Teck Kin, head of research at UOB Global Economics & Markets Research, said his team is still projecting three 25-basis-point rate cuts in the US – in September, October and December – and two cuts in 2026. THE BUSINESS TIMES Join ST's Telegram channel and get the latest breaking news delivered to you.
Business Times
13 hours ago
- Business Times
The Fed is just as confused as the rest of us
THE most powerful institution in global finance is as completely and utterly confused as the rest of us. At its policy decision on Wednesday (Jun 18), the US Federal Reserve's rate-setting committee held rates at 4.25 to 4.5 per cent, but Chair Jerome Powell and his colleagues essentially acknowledged that they had no idea what would come next. They couldn't precisely project where US President Donald Trump's tariff rates would end up, much less how they would impact consumer inflation and the labour market. Nor could they confidently handicap jarring changes to immigration and fiscal policies and the evolving war between Israel and Iran. The big risk, of course, is that the uncertainty and indecision will make the Fed late to arrest a potential increase in unemployment. In the Summary of Economic Projections, the median member of the Federal Open Market Committee pencilled in two rate cuts this year. But that 'base case' constitutes a massive oversimplification of the outlook, and some investors may be underestimating just how fat the tails are in the distribution of potential outcomes, even over just the next three or four months. Of the 19 respondents, 14 policymakers thought the risks to their inflation forecasts were weighted to the upside — the same number that thought as much about the risks to their unemployment projections. In a nutshell, they don't pretend to know what's coming, but Powell thinks we may find out relatively soon. At his post-decision press conference, Powell said: 'We feel like we're going to learn a great deal more over the summer on tariffs. We hadn't expected them to show up much by now, and they haven't. And we will see the extent to which they do over coming months. And I think that's going to inform our thinking for one thing. In addition, we'll see how the labour market progresses.' BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Given all the uncertainty, Powell is right to stay in wait-and-see mode, but he can't linger there too long once the data breaks. Meanwhile, those of us on the sidelines should prepare for the policy outlook to shift quite quickly, potentially as soon as the Fed's Sep 16-17 meeting. Maybe we really will get two rate cuts this year, but it's also perfectly plausible that we'll get 150 basis points worth – or none. It's a great environment for high-stakes gamblers – but not so much for American households. As Powell alluded to, it's largely trade policy that has put us all in this bind. In recent months, the disinflationary trends in housing and non-housing services have the core personal consumption expenditures deflator – the Fed's preferred inflation gauge – up around 2.6 per cent in May from a year earlier. That's not at all terrible, and it would probably be poised to converge on the Fed's 2 per cent target if not for Trump's extremely ill-timed and pointless trade wars. Without tariffs, the Fed would probably be cutting right now, providing ballast to a wobbly labour market and a housing market that's already seeing year-over-year price drops in some parts of the country. Unfortunately, the central bank has to play the hand it's dealt. In the immediate term, we still don't know if companies will pass on higher prices to consumers, accept narrower margins or manage their way to stable prices by laying off parts of their workforce – and maybe it will be a combination of all three. The risks to both the Fed's stable prices and maximum employment mandates are substantial, and that's causing paralysis among policymakers – a weird 'calm before the storm' effect both at the Fed and in financial markets. But at some point before autumn, we are very likely to see something shatter that calm. An alarming jump in initial jobless claims could lead to rate cuts above and beyond any policymaker's base case. A jarring CPI report or two could keep the Fed on hold for longer and prompt a selloff in bonds. And a jump in realised inflation coupled with signs of unanchored inflation expectations could even put hikes back on the table. If they're late to mitigate the damage, Fed policymakers can take cover in blaming Trump's self-sabotaging trade policy. But they must prepare to act immediately and convincingly once the signals break in a particular direction. BLOOMBERG
