Bulls And Bears

Property curbs, trade tariffs batter shares

Property stocks hit by cooling measures; trade war fears keep Asian bourses in red

Investors faced two storms when markets opened yesterday with trade tariffs on the one hand and tough new property cooling measures on the other, with the inevitable result on local shares.

The Straits Times Index was under pressure from the opening bell and ended up falling 2 per cent, or 64.89 points, to close at 3,191.82 - its lowest all year. Turnover came in at a hefty 2.28 billion shares worth $2.01 billion, with losers outnumbering gainers 290 to 121.

The cooling measures announced on Thursday night took observers by surprise. Most property stocks took a hit, with CapitaLand falling 5.98 per cent to $2.99 apiece on trade of 33 million shares, putting it among the top five stocks by traded volume.

Oxley Holdings, with 30.36 million shares changing hands, dived 15.85 per cent to 34.5 cents.

United Overseas Bank noted that the sharp increase in sales duty rates is "sending a strong signal on the Government's reluctance to let property prices increase too quickly" amid a recovery in the private residential sector over the past year.

Despite being hit by exposure to the property market, second-quarter earnings for local banks should still be positive, supported by sustained net interest margin increases and low credit costs, said DBS Group analysts Lim Sue Lin and Lim Rui Wen in a note.

Transport giant ComfortDelGro slipped 3.38 per cent to $2.29.

The consumer watchdog announced that the Grab-Uber merger had led to a reduction in competition between ride-hailing platforms and is recommending financial penalties. ComfortDelGro and Uber formerly had a deal to compete against Grab.

Amid the hubbub over the cooling measures, the opening shots of a trade war between the United States and China were fired.

China hit back immediately after the US$34 billion (S$46 billion) salvo from the US with duties on such items as soya beans and automobiles. US President Donald Trump is apparently looking to impose tariffs on a further US$16 billion worth of Chinese goods, with the total set to be US$500 billion.

The trade war has been a constant refrain throughout the past week, keeping Asian markets swimming in a sea of red.

There could be a silver lining with overall external demand being relatively resilient for China.

"Though some US export orders may be lost due to the tariff hikes, there is the probability of shipment re-routing through other countries for those competitive exports from China," said Bank of America Merrill Lynch analysts.

A version of this article appeared in the print edition of The Straits Times on July 07, 2018, with the headline 'Property curbs, trade tariffs batter shares'. Print Edition | Subscribe