Singapore stocks, gold extend slide as Middle East crisis deepens

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SINGAPORE – Singapore stocks and gold prices slumped on March 9 as the widening crisis in the Middle East pushed oil prices close to US$120 a barrel, stoking fears of a fresh bout of inflation that could force central banks to hike interest rates.

The benchmark Straits Times Index (STI) closed down 91.64 points, or 1.89 per cent, to 4,756.61.

SATS and Singapore Airlines were among the decliners, with global air travel still disrupted in the second week of the conflict. SATS – which does air cargo handling, ground services and inflight catering – sank 3.84 per cent to close at $3.51, while SIA fell 2.41 per cent to $6.49.

Yangzijiang Shipbuilding tumbled nearly 5 per cent to $3.99, before paring losses to close at $4.10. The stock had shot up more than 16 per cent the previous week after the shipbuilder reported second-half net profit of 4.5 billion yuan (S$837 million).

Aviation and shipping have been weighed down by a surge in oil prices, driven by strikes on energy infrastructure and disruptions to shipping through the Strait of Hormuz, which carries about 20 per cent of the world’s oil trade. Several Gulf nations have also cut oil output, raising fears of tighter crude supplies.

Some oil and energy stocks on the SGX, including Rex International, Geo Energy Resources and RH Petrogas, bucked the broader market decline.

Shares of Sembcorp Industries reversed from early losses after the company refuted media reports that its Fujairah F1 power and water plant in the United Arab Emirates had suffered damage from Iranian missiles.

Its shares closed down 0.35 per cent to $5.70 on March 9.

Sembcorp’s Fujairah F1 Independent Water and Power Plant (IWPP), located in the emirate of Fujairah, is 40 per cent owned by the group.

Sembcorp also operates the Salalah IWPP and the Manah II Solar Independent Power Project in Oman.

According to a DBS research note released last week, Oman and the United Arab Emirates accounted for about 8 per cent of Sembcorp’s net earnings.

DBS added that Sembcorp has no scheduled liquefied natural gas cargoes from Qatar over the next four to five months, meaning its supply should not be affected by disruptions in the region.

The three local banks also fell into the red. DBS dropped 1.25 per cent to $54.31, while OCBC Bank fell 1.73 per cent to $20.46 and UOB retreated 1.55 per cent to $35.51.

Other index constituents also fell, with Singtel losing 1 per cent to $4.95 and Keppel shedding 3.67 per cent to $11.82.

ST Engineering fell 2.01 per cent to $10.73, despite analysts suggesting that its defence and public security segment will remain a structural growth driver amid geopolitical tensions and rising global defence budgets. The counter is still up about 5 per cent over the past month.

Shares of Catalist-listed CNMC Goldmine fell 7.41 per cent to $1.75, though the counter remains up by over 35 per cent over the past month, tracking the growth in gold prices.

Spot gold prices fell 0.73 per cent to US$5,130.12 an ounce, after posting the first weekly decline in over a month.

Gold prices have been volatile in recent weeks, spiking about 3 per cent to breach US$5,300 when markets opened on March 2, after the United States and Israel launched a strike on Iran.

The yellow metal has since pared some gains as the US dollar strengthened and energy prices surged, fuelling concerns that the US Federal Reserve may keep interest rates higher for longer, or even raise them further.

This would weigh on assets that do not pay interest, such as precious metals.

Gold is still up nearly 18 per cent since the start of the year.

Other Asian markets were more badly hit than Singapore’s: South Korea’s Kospi index dived 5.96 per cent; Japan’s Nikkei sank 5.2 per cent; and Taiwan’s TAIEX index lost 4.43 per cent.

Hong Kong’s Hang Seng Index dropped 1.35 per cent.

Mr Glenn Thum, research manager at Phillip Securities Research, said the STI’s decline was more muted due to its defensive, bank-heavy composition and limited exposure to the tech and semiconductor sectors that have driven steep sell-offs in other Asian markets.

The geopolitical energy shock reinforces a “higher-for-longer” interest rate outlook, which protects the lending margins of the local banks, he noted.

“Furthermore, local maritime stocks are acting as a natural hedge against energy disruptions, while the STI’s strong dividend yields continue to attract regional capital seeking stability amidst the broader market volatility,” said Mr Thum.

Ms Carmen Lee, head of equity research at OCBC group research, said that the Singapore market is more resilient than the rest of the Asian markets because of the strength and the constituents within the STI.

“Most are in stable and non-oil related industries... Higher valuations or tech-heavy markets are seeing higher selling pressure,” she said.