Most Southeast Asian stock markets ended lower on Friday as investors turned cautious ahead of a speech by U.S. Federal Reserve Chair Janet Yellen, with expectations growing the Fed would raise interest rates soon. Several Fed officials have recently voiced the need for higher rates, and Yellen is expected to echo the same sentiment in her speech later in the day. “I think most Asian markets are awaiting Yellen’s speech… The probability of a rate hike is now around 80 percent versus last week’s 40 percent, so a rate hike on March 15 wouldn’t be a surprise event now,” said Victor Felix, an equity analyst with AB Capital Securities in Manila. “If they are going to raise rates over there in expectation of stronger growth, you can expect more foreign outflows. U.S. investors will be bringing their money back to the United States to right the fiscal stimulus.”
The dollar was broadly steady, but remained on track for solid weekly gains. An increase in Fed interest rate “adds further strength to the U.S. dollar and when that happens you’re going to see a reversal of fund flow from emerging markets,” said Nicholas Teo, a trading strategist at KGI Securities (Singapore) Pte Ltd. Singapore’s FTSE Straits Times Index fell 0.5 percent lower, but posted its fourth straight weekly gain. Consumer staples, telecoms and financials led the decline on Friday.
Golden Agri-Resources Ltd fell 1.3 percent, while Singapore Telecommunications Ltd dropped 0.5 percent. Singapore has been one of the stronger performing markets in Asia this year, “so a lot of hot money that came in on the back of initial weakness in the U.S. dollar is now starting to reverse,” said Nicholas Teo, a trading strategist at KGI Securities (Singapore) Pte Ltd. Malaysia fell 0.4 percent with losses spread across all sectors, while Indonesia dropped 0.3 percent. Philippine shares came off early losses to end slightly higher, but posted their first weekly drop in four. Vietnam ended 0.7 percent higher, led by financial and industrial stocks, but marked their first weekly drop in 10.