STI retreats despite abating geopolitical tensions, closes 7 points down

SINGAPORE - Local stocks headed south for the second straight day on Thursday, even though other markets in the region pushed higher as jitters over geopolitical tensions subsided.

The Straits Times Index (STI) slid 6.89 points, or 0.24 per cent, to 2,884.69, paring earlier gains from morning trade.

This was little helped by fresh figures for the country's manufacturing output, which fell 5.4 per cent year-on-year in October, weighed down by a 14 per cent drop in electronics production. The fall had come in slightly above market expectation of a 5.3 per cent decrease, according to a Reuters poll.

The STI's muted performance tracked similar movement in Hong Kong and Shanghai, which retreated 0.4 per cent and 0.3 per cent respectively.

Analysts believe that traders remain cautious as the spotlight returns to the impending interest rate hike in the United States, slated to take place next month.

"Investors may also hold back trade ahead of the year-end holidays," said broker Krungsri Securities in Bangkok, in a Reuters report.

"Eyes are on the ECB (European Central Bank) meeting, and the release of key US indicators next week, which could affect the Fed's decision at the Dec 15 to 16 meeting."

Markets elsewhere mostly stabilised as fears over Turkey's downing on a Russain fighter jet abated, with Tokyo gaining 0.5 per cent to reach a three-month high.

Seoul rebounded 1.1 per cent, Jakarta added 0.3 per cent and Sydney climbed 0.3 per cent.

Wall Street was little changed on Wednesday, creeping up only 0.01 per cent following mixed economic data. The US markets were closed yesterday for the Thanksgiving Day holiday.

At home, the losses were led by the local lenders, with OCBC Bank shaving eight cents or 0.9 per cent to S$8.72. Trade volume was a hefty 14.8 million units worth S$129.4 million.

United Overseas Bank dropped 35 cents or 1.8 per cent to S$19.25, while DBS Group Holdings dipped six cents or 0.4 per cent to S$16.66.

Nomura noted in a report that the coming year should see investors' focus on local banks shift to growth from asset quality as non-performing loans peak. It also expects earnings to grow 12 per cent on the back of higher interest rates.

tsjwoo@sph.com.sg