Bulls And Bears

STI continues slide on Wall Street plunge

Local banks, Reits retreat further while Asian bourses see mixed fortunes

Local shares continued to fall yesterday following Wall Street's record plunge as support measures failed to calm investors increasingly worried about the economic strain from the coronavirus.

The Straits Times Index (STI) opened 0.4 per cent lower but had a short-lived spike in the early session following a rebound in United States futures. It eventually closed 41.24 points, or 1.7 per cent lower, at 2,454.53. Eight of the STI's 30 components ended the day in the red.

The index was down 28.1 per cent from its 52-week high of 3,415.18 hit in intra-day trading on April 29.

Shares fell in China, Malaysia, South Korea and Taiwan but Australia, Hong Kong and Japan notched up gains.

Hopes of a sustained recovery in equities remain bleak in the near term. Oanda Asia-Pacific senior market analyst Jeffrey Halley said: "Until we see a shock-and-awe fiscal package from the US that backstops the economy - and that's not a given at all - it is impossible to make a recovery case for equities."

Mr Jean-Louis Nakamura, Asia-Pacific chief investment officer at Lombard Odier, believes "the worst for markets may be behind us, at least in terms of extreme dislocations", but conditions for a sustainable rebound have yet to be reached as "the number of unknowns remains just too high".

The gainers on the STI included Yangzijiang Shipbuilding, which edged up 1.3 per cent to 81 cents after it secured a US$1.15 billion (S$1.64 billion) contract to build up to 10 vessels.

Yangzijiang said the deal will see its yards utilised at a healthy rate and help provide a stable income stream for two years at least.

Continuing their slide, United Overseas Bank dipped 0.3 per cent to $19.39, DBS Bank dropped 3.1 per cent to $18 and OCBC Bank retreated 1 per cent to $8.61.

DBS Group Research cut its target prices for OCBC and UOB yesterday on heightened credit costs and margin pressures amid the Covid-19 outbreak following the US Federal Reserve's largest rate cut since 2008.

The research house has a price target of $8.60 for OCBC and $19 for UOB.

Real estate investment trusts (Reits) continued to be among the STI's biggest laggards. Ascendas Reit dropped 5.8 per cent to $2.60 while Mapletree Logistics Trust fell 5.5 per cent to $1.37. The iEdge S-Reit Index, which tracks property trusts here, fell 5.6 per cent to 1,087.88.

Despite the sell-offs, Maybank Kim Eng analyst Chua Su Tye remains positive on the asset class, which could see higher payouts to unit holders as borrowing costs fall.

A version of this article appeared in the print edition of The Straits Times on March 18, 2020, with the headline 'STI continues slide on Wall Street plunge'. Print Edition | Subscribe