An underwhelming Japan stimulus package and moves by short-sellers to capitalise on the sell-off in local banks and oil and gas counters after Swiber Holdings' winding-up move sent the local market tumbling yesterday.
The Straits Times Index skidded 1.71 per cent or 49.93 points to 2,868.69, ending the week down 2.6 per cent.
"Today's selldown is a combination of investors dumping banks and oil and gas plays, and short-sellers taking advantage of bearish sentiment to short Ezion (Holdings) and Ezra (Holdings)," CMC Markets Singapore analyst Margaret Yang Yan said. "Ezion came down 12 per cent and Ezra was down 14 per cent in the last two days."
Ezra was the most actively traded stock, shedding 3.8 per cent or 0.2 cent to five cents, with 95.6 million shares traded. Swiber affiliate Vallianz, the most pummelled stock on Thursday, rebounded 4.8 per cent or 0.1 cent to 2.2 cents on trade of 84.1 million shares.
Investors had been expecting the Bank of Japan to expand the monetary base and cut negative interest rates further, but "everything stayed the same, so the market was disappointed", Ms Yang said.
Many investors were focused on Swiber's liquidation and the potential for more fallout.
"Swiber's winding-up caught everyone by surprise. Although there were some clues leading up to it, nobody expected it to happen so fast," remisier Desmond Leong said.
Singapore banks have come under pressure, given their lending exposure not just to Swiber but also to the broader offshore and marine sector, where more stress could emerge. "The credit default spread may be widening, making it more difficult for other similar oil and gas companies to borrow or renew their debts," Ms Yang said.
While the level of provisioning (about $2.5 billion to $4 billion at each bank) is deemed to be sufficient in relation to Swiber, UBS noted that each of the three Singapore banks has loan exposures in the range of 8 per cent to 12 per cent (or about $16 billion to $27 billion) to these troubled sectors.
"Should more oil and gas services firms follow in Swiber's footsteps, the impact will be much larger and the requirement for provisioning will increase exponentially," UBS said.
Other oil and gas plays under pressure include Nam Cheong, which lost 9.5 per cent or 0.7 cent to 6.7 cents; Ausgroup, down 4.1 per cent or 0.2 cent to 4.7 cents; and Pacific Radiance, which sank one cent or 4.5 per cent to 21 cents.
Sembcorp Marine eased 2.5 cents at $1.41 after second-quarter net profit plunged 91 per cent year on year to $11.5 million, dragged down by foreign exchange losses and an impairment charge.
DBS Group Research, which has a fully valued call on SembMarine, said the environment remained challenging.