The share market carnage across Asia and Europe yesterday is pushing many local investors to get out of equities and increase their cash holdings while waiting for the panic to subside.
IG market strategist Bernard Aw told The Straits Times yesterday: "The mood is very, very nervous. It's a bloodbath not just in Singapore, but all of Asia. The prospect of further slowdown in Singapore's GDP adds to the nervousness."
Investor Arthur Cheong described yesterday's meltdown as one of the "fiercest" in recent years. "It's crazy to see drops of 4 per cent to 5 per cent or more in one day in stock markets like Hong Kong and Australia. The pace of the drop is also much faster than expected. It's just that people are expecting much less growth going forward," he said.
The wild market gyrations in recent months have kept Mr Cheong sidelined but he said he is likely to get back in the game if the Straits Times Index (STI) drops to the 2,600 to 2,700 levels. It closed down 4.3 per cent to 2,843.39 yesterday. "Those are better levels to buy at because support is strong there, but you have to be selective as there isn't much positive news on the horizon," he added.
Since September last year, he has increased his cash holdings to 50 per cent of his investment portfolio, and pared his allocation in Singapore shares to less than 15 per cent. His US stock holdings have been increased up to 30 per cent. "The paper loss is quite painful for those who had invested in small- and mid-cap stocks on the STI, especially the oil and gas counters, because of the slump in oil," he said. "A lot of the tech companies in the US, like Alibaba, are still doing well, many of them are global enterprises."
Remisier Alvin Yong said many retail investors have not been as active since the penny stock crash in 2013, and even more now are being sidelined by the unrelenting market rout. "When the debt to equity ratio exceeds a certain percentage, it triggers a margin call. The client then has to top up the difference in value in cash or be forced to liquidate shares. It's the forced selling that creates selling pressure," Mr Yong said.
The lacklustre second-quarter earnings season has not helped either. Only one-third of the 27 STI constituents that have reported exceeded analyst forecasts, according to Bloomberg data.
Sentiment is still largely bearish because there are those who think a rate hike next month in the US is still likely, Mr Yong said.
But there are also bargain hunters, albeit a minority, watching for opportunities among undervalued local companies that might be potential targets for takeover or other corporate action, he added. "Some think it's a good time to enter, but they are a minority. Some property stocks are trading at very depressed levels, and look ripe for potential takeover or delisting offers to avoid QC (qualifying certificate) penalties," Mr Yong said.
Mr Aw said market participants are watching China and US economic data for the health of the global economy, and looking out for the next policy intervention by China.