Bulls And Bears

Regional shares fall on fears of global recession

With equities on the slump, rotation in safe havens, such as gold, resumes

Regional shares fell again yesterday as mid-week confidence - driven by monetary and fiscal stimulus measures by governments to tackle Covid-19 - dissipated.

With fears mounting over the possibility of a worldwide recession, worst-case scenarios of a sustained spread in Europe and the United States are starting to be priced in, AxiCorp chief market strategist Stephen Innes noted.

The negativity across regional markets did not surprise Oanda Asia-Pacific senior market analyst Jeffrey Halley, who felt the sentiment reflects "the state of the world right now" instead of "rallies built on foundations of sand" after the United States' Federal Reserve lowered rates on Tuesday.

The Straits Times Index (STI) lost 57.29 points or 1.9 per cent yesterday to finish at 2,960.98 - the first time it has closed below 3,000 since late October 2018. It was down 50.1 points or 1.7 per cent for the week.

Elsewhere in the Asia-Pacific, Australia, China, Japan, Hong Kong, Malaysia, South Korea and Taiwan all closed with losses. Australia's ASX 200 fared the worst, skidding 2.8 per cent to 6,216.20, near an 11-month low.

With equities on the slump, rotation in safe havens such as gold resumed. Spot prices traded as high as US$1,685.60 an ounce during the Asian session. It is having its best weekly gain since late October 2011.

With investors ditching risky assets, the local market continued to see above average activity. Trading volumes here stood at 1.38 billion shares worth $1.63 billion with losers trumping gainers 362 to 137.

Yangzijiang Shipbuilding was the STI's most active counter and best performer, managing to stave off the broad market sell-off. China's largest non-state shipbuilder jumped 5.2 per cent to 90.5 cents.

Reports emerged yesterday that Yangzijiang received containership orders worth more than US$800 million (S$1.1 billion) from investment firm Tiger Group.

Separately, DBS Group Research analyst Ho Pei Hwa said Yangzijiang shares have been "overly penalised by macro concerns" and its low valuation is "unwarranted".

She added that the stock is trading below its net cash value of $1.05 a share and trading at a 40 per cent discount to regional peers.

Singapore banks continued to decline. DBS fell 2.5 per cent to $23, OCBC lost 2 per cent to $10.21 and UOB dipped 2.3 per cent to $23.20. The trio closed at their respective 52-week lows yesterday along with fellow index heavyweight Singtel, which fell 1.3 per cent to $2.95.

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A version of this article appeared in the print edition of The Straits Times on March 07, 2020, with the headline Regional shares fall on fears of global recession. Subscribe