Markets Fall As US Fed Hint at Money-Printing Slowdown


Last night, the US Federal Reserve’s Chairman Ben Bernanke praised the US’s healing economy but hinted that the Fed’s money-printing might start to slowdown “later this year”. Those three little words sparked a nose dive in the US markets as the S&P 500 Index (a broad measure for the US stock market) tumbled by 1.4% to 1,628 after Bernanke’s comments.

It’s generally accepted that the Fed’s money-printing actions have been propping up stock markets around the world and there are fears of adverse consequences to stock prices should the Fed stop pumping money into the system. While I’ve cautioned against trying to pinpoint exact causes for stock prices’ rise-and-fall each day, this time, the market falls does seem to be connected to the Fed’s statements.

Regional stock markets were feeling the same jitters as the US market when they opened their trading sessions in the morning. Japan’s Nikkei 225 Index started the day 1.1% lower at 13,102, while Hong Kong’s Hang Seng Index was down by 1.5% right from the get-go. At home in Singapore, the Straits Times Index (SGX: ^STI) rang the opening bell at 3,187, 0.8% lower than Wednesday’s close, and is now down to 3,150 at the time of writing (all prices quoted for other shares or indices are collated at the same time, 11:45am).

Most of the STI components are in the red but, one of the hardest-hit group of shares would be the real estate investment trusts (REITs). As a group, they are represented by the FTSE ST Real Estate Investment Trust Index (SGX: FSTAS8670) and it has slipped by 3.3% to 759. Even Singapore’s oldest REIT, Capitamall Trust (SGX: C38U). ain’t spared as it’s down by 3% to $1.97.

The fears concerning REITs that the markets have aren’t new and manifested themselves four weeks ago on 23 May 2013. There’s a distinct possibility that interest rates might rise across the board once the Fed slows down its quantitative easing programme. When that happens, it makes it harder for heavily-levered REITs to refinance their debts. But, not every REIT’s equal and those with conservative balance sheets might even turn out to be bargains.

Foolish Bottom Line

It’s easy to fall prey to fear when the markets are falling, but that is when great opportunities appear for investors with a long-term view toward the markets. When quality businesses with sound fundamentals see their share prices fall in contagion with the general market, it’s time for opportunistic bargain hunters to pounce. I know what I’ll be doing when prices fall even further. What about you?

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.