SINGAPORE - Investors ran for the exits on Monday (May 6) as the threat of a full-blown trade war unexpectedly reared its head overnight.
The Straits Times Index (STI) skidded 3 per cent or 101.67 points to close at 3,290.62, after US President Donald Trump tweeted that he plans to to ratchet up tariffs on Chinese imports on Friday, upending markets that had expected a resolution to trade talks within the month.
According to Singapore Exchange data, this is only the third time in the last five years that the index has plunged 3 per cent or more in a single session, with the previous times being in August 2015 and January 2016.
About 1.44 billion securities worth $1.49 billion changed hands, which worked out to an average unit price of $1.03. Losers outnumbered gainers 369 to 100, or about 11 securities down for every three up.
Penny stock International Cement was far and away the most actively traded counter, with 99.3 million shares changing hands before it closed flat at four cents.
It was followed by Genting Singapore, which lost two cents or 2.06 per cent to $0.95 on a volume of 40.58 million. Resorts World Sentosa, which is owned by the casino operator, has set aside $1 billion to intensify the use of its existing land and to buy about one hectare of new land, Senior Minister of State for Trade and Industry Chee Hong Tat said in Parliament on Monday.
Other active index counters included Yangzijiang Shipbuilding, which closed down 2.56 per cent to $1.52, and Ascendas Reit, up 0.99 per cent to $3.06.
In New York earlier, US stock index futures dived after Mr Trump said he would raise tariffs on U$200 billion worth of Chinese goods to 25 per cent from 10 per cent by this Friday, and would soon target hundreds of billions more.
"For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods," Mr Trump tweeted on Sunday night. "The 10% will go up to 25% on Friday."
DBS analysts wrote in a research note on Monday morning that Mr Trump's tariff threat will likely create a "knee-jerk impact" on financial markets, and that the latest move could be his negotiation strategy to put pressure on China to agree to a deal very soon.
Regarding the impact on the Singapore market, the researchers noted that the risk-off effect should send cyclicals lower, with stocks likely to be down over the next 1.5 days, before attention turns to China's next move, as Chinese Vice-Premier Liu He is scheduled to return to the US for trade talks on Wednesday. The analysts added that a pullback of the STI to 3,300 is on the cards.
Elsewhere in Asia, equities tumbled and the safe-haven yen strengthened 0.3 per cent to 110.72 per US dollar, the strongest in more than five weeks.
The benchmark Shanghai Composite Index sank 5.58 per cent by the close, its steepest single-day drop since February 2016. The Shenzhen Composite Index, which tracks stocks on China's second exchange, plummeted 7.38 per cent.
Around 1,000 mainland firms sank the maximum allowed 10 per cent daily limit. But market sentiment was lifted somewhat after China said its trade delegation is still preparing to go to the United States, Reuters reported
Hong Kong's Hang Seng index ended down 2.9 per cent, regaining some lost ground in the late afternoon session.
Shares in Sydney closed 0.8 per cent weaker while markets in Seowl and Tokyo were closed for holidays.
The offshore yuan fell as much as 1.3 per cent to 6.8218 to the US dollar, its biggest fall in more than three years to its lowest since Jan 10, before trading at 6.7797 as of 4:30 pm. in Hong Kong. The onshore rate slid 0.46 per cent to 6.7659 per dollar.
The flight to safety also saw the US dollar surge against higher-yielding, higher-risk units, with South Africa's rand off 1 per cent, the Mexican peso 0.9 per cent lower, and the Australian dollar 0.6 per cent lower, AFP reported.
European shares fell sharply when trading opened on Monday. Germany's DAX and France's CAC indices led declines, down 1.7 per cent and 1.8 per cent respectively. Italy and Spain also fell more than 1 per cent while markets in Britain remained shut for a bank holiday.
On oil markets, both the US West Texas Intermediate and Brent crude were hammered more than 2 per cent by worries that a trade war between the world's top two economies could hit demand for the commodity.