Most Southeast Asian stocks fell on Wednesday, as risk appetite soured after two US Federal Reserve officials stoked hopes that interest rates would be raised at least once this year, while investors braced for the minutes of a Fed meeting. New York Federal Reserve Bank President William Dudley said a rate hike in September was possible, while Atlanta Fed President Dennis Lockhart said the US economy is likely strong enough for at least one rate increase before the end of 2016, with two a possibility.
Comments from Dudley, a permanent voter on policy and a close ally of Fed Chair Janet Yellen, also included an unusual warning on low bond yields and were seen as more hawkish than a cautious message last month. Investors took the comments as a signal that a rate hike in September is back on the table, said Victor Felix of AB Capital Securities Inc. "I think a rate hike for them (investors) is not on the radar at this point, at least not for this year."
Regional markets also took cues from last night's profit-taking in US equities, Felix said. US stocks eased from record highs on Tuesday after comments from Federal Reserve officials fuelled speculation of an interest rate hike this year. The US Fed kept rates on hold in June despite some Fed officials talking up the possibility of a rate increase in the preceding weeks.
Broader sentiment also took a hit as oil prices fell from 5-week highs, as analysts doubted possible producer talks to restrain oversupply would be successful. Singapore hit a more than one-week closing low with bluechips Singapore Airlines and Singapore Telecommunications among the top losers. Philippine stocks fell, dragged down by energy shares with Petron Corp losing 1.6 percent.
For regional markets such as the Philippines, valuations seem to be on the higher side, said Charles Ang of COL Financial, adding stocks were no longer cheap. Malaysian stocks closed lower, dragged down by big caps such as British American Tobacco Malaysia Bhd, while Thailand fell as energy and industrial stocks lost ground. Bucking the trend, Vietnam closed higher, supported by gains in consumer cyclicals. The Indonesian stock market was closed for a public holiday.