Regional markets, including the local bourse, lost ground again yesterday after being rocked by news that both the oil price and the Chinese currency have hit fresh lows.
Singapore's benchmark Straits Times Index (STI) fell 13.83 points or 0.49 per cent to 2,834.63. For the week, it dropped 1.54 per cent, with a decided lack of festive cheer as investors eye an uncertain year end.
Once again, plunging oil prices were a top concern for the emerging markets, after the global crude benchmark Brent futures fell to its seven-year low at US$39.13 (S$55).
But, increasingly, investors are seeing more cause for concern beyond persistently weak commodity prices and the impending Federal Reserve rate hike, as the Chinese yuan hit a full-year low and the United States dollar rose to around 6.4563 against the yuan.
"A US rate hike would have a major impact on money flows out of emerging markets, including Hong Kong and China. Also, if the yuan continues to depreciate, that is negative to stocks as well, because it means investors are not confident about China's economic restructuring," First Shanghai Securities chief strategist Linus Yip told Reuters.
Little wonder that Shanghai shed 0.6 per cent yesterday, pushing the weekly drop to 2.6 per cent. Hong Kong lost 1.11 per cent, and Sydney was down 0.18 per cent. Tokyo managed a 0.97 per cent rise, but was still off 1.4 per cent for the week.
In Singapore, 22 constituent stocks on the STI ended lower, with Jardine Cycle & Carriage down $1.12 or 3.21 per cent to $33.80 - the top-losing blue chip yesterday.
All three local banks dropped, led by United Overseas Bank with a nine-cent or 0.47 per cent drop to $19.16. DBS Group Holdings was down five cents or 0.30 per cent to $16.41, and OCBC Bank closed two cents or 0.23 per cent lower at $8.62.
Banking plays are regarded as a safe bet, given that the widely expected rate hike may boost the banks' interest margins. But DBS analyst Lim Sue Lin said the boost may actually be limited.
"We believe the net interest margin (NIM) uptick may be muted as we expect funding costs to catch up, dampening the impact of loan yield increases on NIM," she said in a note yesterday. "If the excitement of the NIM spike for the Singapore banks cools off, there leaves hardly any drivers for growth in 2016."
Among the top-performing STI constituents, the Singapore Exchange (SGX) gained the most, rising seven cents or 0.95 per cent to $7.47, while Singapore Press Holdings put on one cent or 0.26 per cent to close at $3.88.
Outside the blue-chip segment, Jasper Investments was the top active counter of the day, with 36.2 million shares transacted. It rose 0.4 cent or 50 per cent to 1.2 cents.
BHG Retail Reit had a muted debut on the SGX yesterday, closing flat at 80 cents, its offering price.
Singapore Post fell four cents or 2.28 per cent to $1.715.