SINGAPORE - Singapore stocks fell in the grips of bear territory, after Chinese equities plunged by more than 7 per cent for a second time this week, a negative lead from Wall Street and oil prices sank to fresh 11 year lows.
The Straits Times Index closed at 2,729.91, down nearly 23 per cent since its 12-month high of 3,539.95 on April 15, 2015. A bear market is defined as one in which stocks have fallen by 20 per cent or more from a recent high.
Traders see 2,665-2,700 as the next support, as hedge funds are seen continuing to short the Singapore market. "Big index stocks like banks, telcos and the offshore marine were sold, especially when the market is fragile.
Across Asia, bourses slumped after China again guided the yuan sharply lower, and Shanghai shares plunged more than 7 per cent, triggering a stock market circuit breaker for a second time this week.
"It's going to be a rough ride," UOB Kay Hian head of research Andrew Chow said. "This is a surprise. Most of us felt there should be some positive effect ahead of Chinese New Year. Instead we are starting 2016 so negatively. Some big caps are getting downgraded, sellside research analysts are expected to downgrade sectors like offshore marine further."
Banking counters DBS sank 2.5 per cent or 40 cents to S$15.70, OCBC dropped 2.4 per cent or 21 cents to S$8.37, UOB fell 2.5 per cent or 47 cents to S$18.38.
Other STI constituents including Keppel Corp fell 6.6 per cent or 41 cents to S$5.82, Singtel lost nearly 2 per cent or seven cents to S$3.46 and CapitaLand sank 3.7 per cent or 12 cents to S$3.14. Genting Singapore fell 3.4 per cent or 2.5 cents to 71.5 cents, with 43.8 million shares traded.
Noble Group was the most actively traded stock as funds continued to jettison the commodities trader after its credit rating got slashed to junk status by Moody's. The stock plunged 9.2 per cent or 3.5 cents to 34.5 cents, with 126.5 million shares traded.
The oil price rout continued to weigh on oil-related plays including Ezra, which fell 5.3 per cent or 0.5 cents to nine cents, with 37.4 million shares traded.
"A good correction will bring out buyers," Kevin Scully, executive chairman of independent research house NRA Capital, said. "The STI could hit 2,500 by the middle of the year, and that would be a good buy level."
Remisier Alvin Yong said worries over Chinese economic growth may lead to further stimulus measures being introduced. "And the FOMC minutes linked inflation to the pace of rate hikes. That means, if the US dollar continues to strengthen and oil prices remain low, it is unlikely that the pace of inflation will quicken in the US, which could lead to a more gradual pace of rate hikes. That could be good for equities," he said.
Meanwhile, Singapore Post, which is undergoing a corporate governance special audit, told the Singapore Exchange on Thursday there is "no material development" nor is it aware of any information that would explain "unusual price and volume movements in its shares on Jan 6."
The postal and e-commerce player's stock fell 6.2 per cent to S$1.51, with 31.4 million shares traded on Jan 6.