Bulls and bears

Panic in China spreads across region

Investors in front of a screen showing market movements in a stock firm in Hangzhou.
Investors in front of a screen showing market movements in a stock firm in Hangzhou. PHOTO: AFP

STI sheds 1.67% as Singapore investors take cue from selldown in mainland markets

Stock markets across Asia were caught up in the panic that flooded Chinese markets again yesterday.

Mainland investors kept up their stampede towards the exit as the massive sell-off of the past three weeks appeared to reach a head, despite government efforts to calm the markets.

The continuing stand-off over the Greek debt crisis added to the volatility in Asian trading.

Shanghai's Composite Index plunged 5.9 per cent, Hong Kong's Hang Seng Index slumped 5.8 per cent and Japan's Nikkei 225 tumbled 3.1 per cent.

At home, the Straits Times Index (STI) sank well below the 3,300-point mark, shedding 55.94 points, or 1.67 per cent, to close at 3,284.99.

CMC Markets analyst Nicholas Teo said the rampant selldown in China is a classic "capitulation stage action" - seen as a bubble bursts.

"During this stage, most traders and investors signal their loss of hope in their positions, deciding to bite the bullet, dumping everything," he said, adding that the selldown has been "a lot more severe than expected".

It is also likely to have a greater impact on Singapore shares than the Greek debt crisis, given that many local companies - such as banks and property developers - have exposure to the China market, he said.

Among the worst-performing blue chips yesterday was United Overseas Bank, which shed 45 cents to $22.93.

Commodities trader Noble Group, which announced a $4.59 million share buyback, fell two cents to 69.5 cents.

Olam International and Golden- Agri Resources tumbled for the third straight day, with Olam down five cents at $1.82 and Golden-Agri off one cent at 39 cents.

OCBC Investment Research analyst Carey Wong said in a report that the global picture for commodities does not bode well, stoked in part by the strengthening United States dollar.

Public transport operator SMRT slipped four cents to $1.505, following a major train disruption that involved two lines on Tuesday. The disruption lasted three hours and hit about 250,000 commuters.

Nightclub operator Lifebrandz was the most actively traded stock, with 85.8 million shares changing hands. It lost 0.2 cent to 0.6 cent.

The company on Tuesday said it was looking at a "very substantial acquisition or reverse takeover", although no definitive agreements had been reached.

On Wall Street, sentiment perked up slightly on Tuesday as the Dow Jones Industrial Average inched up 0.53 per cent.

An ABN-Amro report noted that sentiment seems to have improved, given the more constructive atmosphere from the European meetings on Greece's debt situation.

"However, the hard part lies ahead," it added. "Negotiations will be tough and may not succeed."

A version of this article appeared in the print edition of The Straits Times on July 09, 2015, with the headline 'Panic in China spreads across region'. Print Edition | Subscribe