BullsAndBears

STI falls in regional rout over oil, China woes

Sell-off pushes 25 counters on STI lower, with Sembcorp Industries the top losing blue chip

Asian markets were back in choppy waters again after a bright start to the week, as investors again rushed for the exit on concerns over flagging commodity prices and new worries over China.

A string of bad news emerged yesterday to rock already wobbly sentiment in the region, with China reporting a 6.8 per cent year-on-year drop in November exports - the fifth straight month of decline.

The data came after the global crude benchmark Brent futures dipped over 5 per cent overnight to US$40.73 per barrel, as punters reacted to fears of a supply glut after Opec could not agree on lowering production at its meeting last week.

As a result, all key regional markets were down. Shanghai slid 1.89 per cent and Hong Kong dropped 1.34 per cent, while Tokyo was down 1.04 per cent. Kuala Lumpur ended 0.17 per cent lower, and Sydney lost 0.91 per cent.

Singapore's benchmark Straits Times Index had a similar session, dropping 24.89 points or 0.86 per cent to 2,876.03, after a 0.76 per cent gain on Monday.

Investors in Asia will remain cautious towards the year-end amid a myriad of issues, Bank of Singapore chief economist Richard Jerram told The Straits Times. "The dropping oil prices are triggering concerns of another bout of weakness in Asia's emerging markets and their currencies, and that's the main reason behind the regional drop."

He added that another worry for the market was China apparently allowing the yuan to slide again, which may throw up more volatility for regional currencies. Reflecting that move, the US dollar rose to a new full-year high of 6.4188 to the yuan at yesterday's close. He said it was "understandable people will want to take profit where they find it... at the end of a rather challenging year".

In Singapore, that sell-off pushed as many as 25 counters on the STI lower, with Sembcorp Industries dropping 12 cents or 3.81 per cent to $3.03 - the top losing blue chip. The drop came despite the news on Monday that the firm has secured a US$300 million (S$421 million) Myanmar power plant deal. Investors were still mindful of the contract woes faced by its rig-making unit Sembcorp Marine, which pared six cents or 3.19 per cent to $1.82.

At the other end of the ledger, only three blue-chip counters rose. Singapore Airlines was up 41 cents or 3.88 per cent to $10.98, Thai Beverage put on 1.5 cents or 2.21 per cent to close at 69.5 cents, and Ascendas Real Estate Investment Trust gained three cents or 1.28 per cent to $2.38.

Outside the STI, Neptune Orient Lines dropped 0.5 cent or 0.41 per cent to $1.22, a day after it received a cash offer of $1.30 per share as CMA CGM moved to acquire it.

DBS analyst Suvro Sarkar urged investors to accept the offer. "We are forecasting that 2016 will be another year of red for the liner, with around US$200 million in core losses expected, as freight rates remain depressed across various routes."

A version of this article appeared in the print edition of The Straits Times on December 09, 2015, with the headline 'STI falls in regional rout over oil, China woes'. Print Edition | Subscribe