Asian markets subdued as Fed promises come up short

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BENGALURU (July 30): Stocks across most of Asia's emerging markets drifted lower on Thursday as investors judged a steady message from the US Federal Reserve on stimulus as too little to reinvigorate a rally that has relied on the flood of cheap money globally.

After a cautious start which picked up chiefly on the US central bank's promise to use "all tools" to support growth, major markets wobbled, while the Philippines, Thailand, Malaysia and Singapore chalked up significant losses.

The Fed on Wednesday left interest rates near zero and pledged to keep policy accommodative for as long as needed to support the economy, but said data was pointing to a slowing in the pace of recovery.

"The Fed's decision bodes well for Asian markets over the medium term... its commitment to keep policy ultra easy and expand upon it if necessary will continue to keep US real yields under pressure, and in turn limit the ability of the USD to strengthen against Asian FX," said Mitul Kotecha, senior EM strategist at TD securities.

"(But) his comments about high frequency data reflecting a slower pace of growth highlights the significant risks to US recovery and risks that this feeds through to Asia."

Wei-Liang Chang, macro strategist at DBS Bank, said markets may have hoped for more concrete Fed guidance on policy, such as through a yield curve control target, or tying policy changes to inflation or unemployment outcomes. 

Singapore shares slid to two-month lows, dragged down by big banks after the central bank asked lenders to cap dividends this year, denting the appeal of a sector favoured for steady payouts to shareholders.

The index dropped as much as 2.4%, after the Monetary Authority of Singapore asked banks to cap 2020 total dividends at 60% of what they paid out last year, to boost lending capacity and increase capital buffers, amid the pandemic.

Shares of top lenders hit their lowest in months, with the region's biggest bank DBS Group sliding 4.3%, while OCBC and United Overseas Bank shed up to 5.5% and 4.1% respectively.

Cases of the coronavirus also continued to surge in Indonesia and the Philippines, sending both indexes lower, and worries have risen over an extension of lockdowns in the latter, where current restrictions are set to expire at the month's end.

Indonesia, Malaysia, Philippine and Singapore markets will be closed on Friday on account of local holidays.
 
HIGHLIGHTS
** Top losers on FTSE Bursa Malaysia Kl Index include PETRONAS Chemicals Group Bhd down 2.87% and Public Bank Bhd trading 2.62% lower
** In the Philippines, top index losers were Robinsons Land Corp down 3.88% and Aboitiz Equity Ventures Inc shedding 2.93%
**Malaysia's 10-year benchmark yield was down 2.1 basis points at 2.634%, while the 3-year benchmark yield fell 0.5 basis point to 1.955%.​​