Banks and blue chips plunge as global outlook looks set to worsen
By
Yang Huiwen
Looking forward, there does not seem to be much light on the horizon with analysts and dealers saying that the local market will continue to be held hostage by developments in the United States. -- PHOTO: REUTERS
ASIAN bourses' steady drift into the red dramatically quickened its pace yesterday with plunges in value knocking investor confidence across the region.
The trickle of depressing profit and output figures became a torrent as Japanese auto makers, South Korean manufacturers, European exporters, HSBC and others lined up to confirm the market's worst fears about the outlook for the global economy.
This - and the massive US$30 billion (S$47 billion) bailout of AIG, coupled with its colossal US$61.7 billion loss - triggered a selling frenzy that sent some of Asia's stocks into a tailspin.
The fierce sell-off saw banks and other blue chips hit multi-year lows, sparking a fresh round of selling reminiscent of what happened last October.
Institutions led the selling of financial stocks, helping to drive all three local banks to lows not seen since 2003. United Overseas Bank suffered its biggest one-day plunge in four months to close at $9.25, its lowest finish since March 2003. DBS fell to its lowest since April 2003 at $7.41, while OCBC fell to $4.16 - a level not seen since September 2003.
What jolted investors the most was the raft of disturbing statistics from Asia, Europe and the United States suggesting further destabilisation.
In Asia, South Korea saw its sharpest-ever industrial output fall in January - down 25.5 per cent year-on-year - while Japan reported a 32.4 per cent plunge in new vehicle sales last month from a year earlier.
In Europe, new data showed manufacturing activity slumped last month to its lowest level in more than 11 years, and a surprise £12.5 billion (S$27.3 billion) HSBC rights issue, combined with its 70 per cent plunge in profits, darkened the mood of the day.
In the US, the Dow Jones Industrial Average opened yesterday at its lowest level in 12 years, slipping 119.6 points to 6,943.3. After three hours of trading, it had lost 237.59 points or 3.36 per cent to stand at 6,825.34.
'Things are getting worse,' said Mr Alex Crooke, portfolio manager at Henderson Global Investors in London. 'The economy is still deteriorating and bad debts are still going to appear,' he said in a Bloomberg Television interview.
Such dire sentiments had a predictable impact on the region's bourses with the local market falling by the most since last November to finish at its lowest since Aug 11, 2003.
The Straits Times Index (STI) closed 3.85 per cent in the red at 1,533.4. But South Korean shares were hammered the most, with the Kospi Index slumping 4.16 per cent.
The only bright spot appeared to be China, whose index defied the selldown by closing 0.5 per cent up, after data showed that deterioration in its manufacturing sector was slowing.
Looking forward, there does not seem to be much light on the horizon with analysts and dealers saying that the local market will continue to be held hostage by developments in the United States.
These are not expected to be positive with last month's US auto sales forecast to be weak, while a payrolls survey is slated to reveal massive job losses.
'The STI has never returned to a bull market rally when the Dow (Jones Industrial Average) is in a bear market,' said ABN Amro's Asian head of equity research, Ms Daphne Roth.
DBS Vickers expects the downtrend to continue in the near term, which will see the STI bottom out at 1,300.
Citigroup strategist Elaine Chu said she expects fund redemption in Asian equities to continue in the coming weeks. Foreign funds withdrew US$21.5 million from Singapore equities alone in the week ended Feb 25, according to data compiled by EPFR Global.
