STI plunges 2% amid risk aversion, US-China trade escalation

The Singapore Exchange Centre in Shenton Way.
The Singapore Exchange Centre in Shenton Way.PHOTO: ST FILE

SINGAPORE - Singapore stocks opened the week on the back foot on Monday (Aug 5), with the Straits Times Index (STI) plummeting by as much as 2 per cent in morning trade.

This comes as investors appear to be in a risk-off mode amid US-China trade escalation, and global uncertainty as the corporate earning season moves into high gear, in a trading-shortened week ahead of the National Day holiday.

As at 11.21am, the STI lost 65.51 points, or 2 per cent to 3,195.60.

Following the midday break, the STI reopened at 3,197.90, down 1.9 per cent, or 63.2 points. Decliners outnumbered losers 323 to 80, after about 592.2 million securities worth $685.9 million changed hands.

Among the most heavily traded by volume, YZJ Shipbuilding tumbled 3.5 per cent, or five Singapore cents to $1.37 with 28.3 million shares traded, and Genting Singapore lost 2.8 per cent, or 2.5 cents to $0.875, with 27.6 million shares traded.

Also dragging the benchmark index were the financials, perhaps in part due to their exposure to Hong Kong - DBS fell 3.4 per cent, or 89 cents to $25.36 on an ex-dividend basis, OCBC declined 1.3 per cent, or 14 cents to $11.07 on a cum-dividend basis, and UOB dipped 0.4 per cent, or 11 cents to $25.89 on a cum-dividend basis.

Other stocks that took a toll on the STI included Hongkong Land which plunged 2.7 per cent, or 16 US cents to U$5.86 on a cum-dividend basis, and Venture Corp which fell 2.6 per cent, 39 Singapore cents to $14.61.

While it was a sea of red among the index stocks, Ascendas Reit bucked the trend to gain 0.7 per cent, or two cents to $3.07.

Elsewhere in Asia, Japan's Topix fell 2.4 per cent, Hong Kong's Hang Seng sank 2.9 per cent and Shanghai's Composite index lost 0.8 per cent. South Korea's Kospi was also down by 2 per cent, and Australia stocks fell 1.4 per cent.

The Aussie dollar, which is a liquid proxy for emerging market and China risk, slipped to a fresh seven-month trough at U$0.6748 after losing 1.6 per cent last week, Reuters reported.

IG market strategist Pan Jingyi noted that concerns over further US-China trade escalations, unrest in Hong Kong and anticipation for softer economic data in the week has set Asian markets up for a soft start to the week.

She added that risk aversion has been the latest theme for markets, with US President Donald Trump's latest threat to impose 10 per cent tariffs on U$300 billion worth of Chinese imports "a curved ball thrown at markets in a week contemplating the lack of support from the Fed".

"With a third of the products in the consumer electronic category and hitting at the core of the tech sector, the semiconductors producers, the broad fear is that not only will the fresh tariffs continue to weigh on manufacturing, the slump will finally bite on the services pie as well," Ms Pan said.

"As far as the market is concerned, the expectation for another Fed rate cut to follow in September had sharply risen to 100 per cent from approximately 67 per cent a week earlier, and this was despite the latest July payrolls arriving matching expectations. With the plunge past the 3,000 level for the comprehensive S&P 500 index, prices can now be seen deviating from the uptrend."

Similarly, CMC market analyst Margaret Yang noted that Mr Trump's tariffs threat marks a retreat of trade negotiations that could potentially lead to higher economic and political risk on a world economy that has already slowed down significantly.

She added that the STI opened lower as broad profit-taking activities kicked off. "Banks, technology, real estates and industrial were among the worst performers, whereas defensive consumer staples and less cyclical sectors such as posting were performing relatively better," Ms Yang said.

She also noted that the Hang Seng Index future is pointing to a 1.6 per cent decline, as the market is not only affected by the trade war, but also by the political chaos that has been lasting for nine weeks.

"The ongoing protest and riot have started to erode investor confidence about the city's future, in particular the real estate, luxury retail, tourism and even public transportation sector... The ongoing protest has also put negative pressure over the city's stability and reputation, potentially hurting business and investment in the long term."

Outside of Asia, US stock-index futures tanked after China's yuan sank beyond seven per US dollar for the first time in more than a decade, data from Bloomberg shows.

The S&P 500 Index futures contracts expiring in September fell as much as 1.2 per cent after China's central bank weakened its daily currency fixing past the key level. Dow Jones Industrial Average contracts shed as much as 1 per cent, while those on the Nasdaq 100 slipped as much as 1.5 per cent. The S&P 500 Index closed lower on Friday, in its worst week since the selloff in December.