On the other hand, policy rates remain at elevated levels as this lags risk-free rates. As a result, corporates are likely to continue to grapple with higher interest costs.
The year of the rabbit got off to a good start with the Straits Times Index breaking above a five times tested resistance at 3,306 indicating an upside of around 3,600. In the short-term, indicators maybe approaching the top end of their range. In addition, the STI has risen by 101 points since Jan 25 and the market is likely to take a breather. However, moving averages are well placed to support progressively higher levels. Support is at the breakout level.
Local risk-free rates as represented by the yield on 10-year Singapore Government Securities continues to fall. As at Jan 26, it stood at 3.79%. Lower risk-free rates are likely to eventually lower weighted average cost of capital and some of this would feed into firmer stock prices.
