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The Federal Reserve's 50bps interest rate cut has landed! The $Straits Times Index(STI.SI)$ is heading towards a 17-year high!

Check out the top SREITs and chip stocks yields to capitalize on the wave of high dividends.

And it's the right time to take advantage of the CBA account!

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On September 18, 2024, the Federal Reserve announced a 50 bps cut in the target range for the federal funds rate, bringing it down to between 4.75% and 5.00%.

However, the Monetary Authority of Singapore has not yet followed the United States' lead in cutting interest rates, instead choosing to maintain its current monetary policy unchanged.

The Monetary Authority of Singapore had previously announced on July 26, 2024, that it would maintain its monetary policy unchanged, marking the fifth consecutive time it has stood pat. The MAS stated that it has kept the slope, width, and midpoint of the exchange rate range unchanged, which will continue to put the Singapore dollar on an appreciation path to curb imported inflation.

On Thursday, the $Straits Times Index(STI.SI)$ closed up 1.13%, reporting at 3633.18, with a year-to-date increase of 12.13%, reaching a 6-year high.

• The $Straits Times Index(STI.SI)$ had previously set a 6-year high on July 15 before retracing. At that time, bank stocks had been the winners in the Singapore market, with strong dividend expectations leading to robust performance before the August earnings reports, which in turn drove the stock market upward.

• Subsequently, as the Federal Reserve's interest rate cut expectations approached, the STI has been on an uptrend for eight consecutive trading days since breaking through the high on July 15 on September 10.

• The market anticipates that the $Straits Times Index(STI.SI)$ is likely to soon set its highest closing price since 2007.

1.$Straits Times Index(STI.SI)$ boosted by high yields SREITs and Chip stocks

Combining a market capitalization greater than 10 billion SGD and the 2024's YTD ranking, we see that the following SGX have also reached historical highs in recently:

$HSBC ADR 10(PU6D.SI)$ , $YZJ Shipbldg SGD(BS6.SI)$ $Great Eastern(G07.SI)$ $SINGTEL 10(Z77.SI)$ $Singtel(Z74.SI)$ $DBS Group Holdings(D05.SI)$ $IHH Healthcare BHD(IHHHF)$, $ocbc bank(O39.SI)$ , $ST Engineering(S63.SI)$ , $GLD US$(O87.SI)$ , $UOB(U11.SI)$ $GLD SG$(GSD.SI)$ $CP All NVDR(TCPD.SI)$ , $SGX(S68.SI)$ , $YZJ Shipbldg CNY(SO7.SI)$ , $CapLand IntCom T(C38U.SI)$, $SPDR DJIA US$(D07.SI)$.

The strong performance of the $Straits Times Index(STI.SI)$ in this wave may be mainly attributed to the boost to the real estate market from the prospect of interest rate cuts.

Singapore, as a market with a large number of REITs sensitive to interest rates, is seen as a major beneficiary.

Let's take a look at the high-yield REITs in the Singapore market (only counting those with dividend yields higher than the latest Federal Reserve rate range of 4.75~5%):

Additionally, the decline in interest rates will also reduce the expected returns on bonds, thereby driving demand for high-dividend blue-chip stocks.

Aletheia Capital analyst Nirgunan Tiruchelvam stated in July, "The Straits Times Index (STI) has one of the highest dividend yields in Asia. As interest rates decrease, the Straits Times Index will shine as a beacon."

Let's take a look at the high-dividend blue-chip stocks in SGX (only counting those with dividend yields higher than the latest Federal Reserve rate range of 4.75~5%):

On the news front, the Singapore stock market has also received strong support from the government. A special task force established by the Singapore government is studying how to strengthen the stock market to address the issues of shrinking market capitalization and low trading volumes.

Chee Hong Tat, Senior Minister of State for Finance in Singapore, stated that the government is ready to make "bold changes" to revitalize the market.

Nigel Peh, Portfolio Manager at Timefolio Asset Management Co., also pointed out: "Against the backdrop of volatility in other global markets, Singapore's position as a safe haven is particularly prominent. With the approach of potential volatility events such as the U.S. elections in the fourth quarter, Singapore's status as a safe haven is expected to be further consolidated."

As the interest rate cut cycle begins, with local support in Singapore and more macroeconomic benefits, it is believed that the Singapore stock market will soon hit a 17-year high.

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