Bulls and bears

Asian markets fall on oil price worries

STI down 1.1%, with analysts divided in views on the market's outlook amid bearish signs

Asian markets retreated yesterday, as investors bailed out on concerns over plunging oil prices.

Brent futures continued their slide to fall below US$33 a barrel on news that Iran is planning to ramp up its production.

The oversupply concerns rocked energy shares on Wall Street, sending the Dow Jones Industrial Average down 1.8 per cent overnight.

This spooked the regional markets into another sell-off, led by Tokyo's 3.15 per cent drop. Shanghai lost 0.38 per cent and Hong Kong fell 2.34 per cent, despite the move by the People's Bank of China to cut the downpayment requirement for mortgages in another move to ease monetary policies.

At home, the Straits Times Index (STI) closed 28.49 points or 1.1 per cent down at 2,550.74. The volume was again tepid, with only 644.4 million shares worth $902.4 million changing hands.


ST GRAPHICS

Amid the bearish signs, market watchers are divided in their take on the outlook. Bank of Singapore chief economist Richard Jerram said the sell-off has been overdone.

"There is a high level of nervousness right now, with markets having violent swings on minimal new information and speculation expectations. In Singapore, valuation has dropped some 11 per cent since the start of the year," he told The Straits Times. "But we do not see a need to panic... That is why we have changed our stance for equities from neutral to overweight this week."

The data on the STI reflected as much. The overall price-to-book value ratio of the index is now just above parity at 1.02, while the dividend yield is at 4.7 per cent, the STI's highest since 2008.

However, DBS chief investment officer Lim Say Boon noted the combination of potential risk factors, including China's slowdown, the United States manufacturing recession and further yuan devaluation.

"None of this has to happen, but these are not trivial risks either," Mr Lim said in a note yesterday.

Whatever the outcome, local investors do not plan on sticking around to find out, and their exit led to 20 of the 30 STI constituent stocks closing lower yesterday.

Hongkong Land fell the most among the blue chips, down 40 US cents or 6.48 per cent to US$5.77, and Wilmar International shed eight cents or 2.75 per cent to $2.83.

OCBC closed down 14 cents or 1.83 per cent at $7.49 and DBS lost 24 cents or 1.78 per cent to $13.27, but United Overseas Bank managed to gain, rising 11 cents or 0.63 per cent to $17.50.

Golden Agri-Resources was the top-gaining blue chip, ahead one cent or 2.86 per cent to 36 cents.

Outside the STI, Frasers Centrepoint lost seven cents or 4.15 per cent to $1.615, ahead of its results announcement yesterday. The real estate group recorded a 47.2 per cent year-on-year drop in net profit for the three months to Dec 31, as returns in Singapore tapered off.

A version of this article appeared in the print edition of The Straits Times on February 04, 2016, with the headline 'Asian markets fall on oil price worries'. Print Edition | Subscribe