Near-zero Fed rate stretches market rally

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ASIAN bourses rallied for a second day yesterday following the Federal
Reserve's decision to leave United States interest rates at near zero.

It
raised hopes among traders in Singapore and elsewhere that liquidity would
continue to pour into the region and spur further buying in blue chips, which
have been stalled for three weeks.

Equally heartening was the Fed
statement that the 'conditions in financial markets have generally improved in
recent months' and that inflation would remain subdued for some time.

But gains on regional bourses were relatively muted yesterday - likely
due to disappointment that the Fed made no mention of ramping up its hefty
purchases of US government bonds and mortgage-linked papers.

Singapore's benchmark Straits Times Index closed 23.5 points higher at
2,302.46, vaulting past the 2,300 level for the first time in almost two weeks.

Property developers, which have been enjoying a run-up recently, were
the big gainers following a spike in interest in new condo launches.

And
with local interbank loan rates also remaining way below 1 per cent - they
closely track US interest rates - developers were also enjoying lower interest
costs on their highly capital-intensive projects.

City Developments
rose 27 cents to $8.80, CapitaLand gained 12 cents to $3.77 and Keppel Land was
up 12 cents at $2.25.

But one property valuer observed that there is a
growing 'disconnect' between the prices of newly launched condos on the primary
market and those on the secondary market.

While Parc Seabreeze near
Parkway Parade was priced at over $1,300 per square foot, completed projects
such as The Esta in the vicinity were sold at below $1,000 per square foot.

'Those buying into freshly launched condos now are taking a bet that the
economy would have recovered so much by the time they are completed in two to
three years' time that valuations would surpass whatever they are paying now,'
said the valuer.

DBS Group Holdings also benefited from the Fed-induced
run-up and gained 20 cents to $11.56. But United Overseas Bank and OCBC Bank
closed unchanged at $14.60 and $6.60 respectively after giving up earlier
gains.

This followed a tepid start in European trading, following news
that the European Central Bank (ECB) had pumped ¥442 billion (S$899 billion)
into over 1,100 banks, charging them an interest rate of only 1 per cent for
use of the funds for a year.

Its latest lending spree has swelled the
ECB's balance sheet to over ¥2 trillion.

Overall, Singapore's market
volume rose slightly to 1.41 billion shares worth $1.4 billion from Wednesday's
1.22 billion shares worth $1.14 billion.

Actively traded counters
included China Hongxing Sports, which ended 1.5 cents higher at 17 cents on a
volume of 131.8 million shares.

Genting Singapore rose two cents to 67
cents with 39.05 million shares traded while China New Town gained 1.5 cents to
11.5 cents with 25.37 million shares traded.

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