STI falls as gloom spreads from Wall St to Asia

Traders move from tech to other sectors after Amazon's weaker-than-expected Q2 profit

A run of confidence on regional markets over this reporting season's strong corporate earnings came to an abrupt end yesterday, as a tech sell-off on Wall Street embittered the mood in Asia.

E-commerce Amazon was the culprit, as it announced that profit for the second quarter plunged 77 per cent from a year ago to US$167 million (S$227 million) - less than a third of what analysts had expected - despite surging sales, as its investments ate into revenue. Its shares fell 3 per cent, while those of Apple, Google-parent Alphabet and Netflix fell at least 1.5 per cent, ending Nasdaq's streak of record closes.

However, Bank Julius Baer's head of Asia research Mark Matthews told Bloomberg the correction is likely short-lived.

"After Amazon's weaker-than-expected earnings, some investors are rotating from technology to energy and other sectors.

"It's a small correction for technology shares. They'll probably bounce back because it's not 2001 and they are not wildly overvalued."

The gloom which spread from Wall Street to Asia left the local benchmark Straits Times Index down 23.96 points, or 0.71 per cent, to 3,330.75. Tokyo shares fell 0.6 per cent, Hong Kong dropped 0.56 per cent, Seoul tumbled 1.73 per cent and Sydney lost 1.42 per cent.

Shanghai, however, eked out a modest 0.11 per cent gain.

Banking stocks were not spared by the sell-off, even as United Overseas Bank said before the market opened that second-quarter net profit rose 5.5 per cent year on year, while total income rose 7.8 per cent to $4.31 billion.

Despite the healthy numbers, UOB shares fell 55 cents to $24.05. OCBC Bank, which also reported a solid set of numbers on Thursday, dropped 10 cents to $11.39. DBS Group lost 57 cents to $21.68.

Other blue chip stocks that have recently announced their results were also in the spotlight.

Singapore Airlines gained 13 cents to $10.28, after reporting on Thursday that net profit for its first quarter had slipped 8.6 per cent to $235 million.

Singapore Exchange gained five cents to $7.59, after reporting on Thursday that net profit for the fourth quarter rose 10.9 per cent from the same period a year ago to $85.2 million.

Sembcorp Marine lost 4.5 cents to $1.695 after saying second-quarter profit plunged 51.2 per cent.

However, RHB Securities Research said in a note yesterday that it expects the rig builder to be able to "play catch-up" in the second half of the year, with the projects it has on its order book.

"The company is reporting an uptick in LNG and cruise ship repairs and upgrades. Current projects at local yards, a semi-sub crane vessel, floating systems, as well as work at its overseas yards, would keep the company busy in the near term," the brokerage said.

A version of this article appeared in the print edition of The Straits Times on July 29, 2017, with the headline 'STI falls as gloom spreads from Wall St to Asia'. Print Edition | Subscribe