The Straits Times Index (STI) has cumulatively shed 2.6 per cent this week to finish at 3,421.39, with the greatest drop incurred in a knee-jerk reaction yesterday as US-China trade tensions escalated.
In the last trading session of the week, the benchmark index fell nearly 70 points or 2 per cent. Intra-day, it declined as much as 2.7 per cent, but staged a mild recovery in the afternoon. Trading volume was heavier than usual, with 1.9 billion shares worth about $1.9 billion changing hands, and losers outpacing gainers 377 to 84.
Commenting on yesterday's trading, Mr Eli Lee, head of investment strategy at the Bank of Singapore, said the weakness of the STI was in line with broad corrections across global equity markets, which suffered a jolt from rising United States-China trade frictions.
Both nations had fired their first shots at each other over the trade issue, with the US announcing tariffs on up to US$60 billion (S$79 billion) in Chinese imports, and China, in a retaliatory move, planning tariffs on 128 US products worth US$3 billion.
"In terms of our asset allocation view, we are maintaining an overweight position in cash during this period of uncertainty. Investors should... actively manage portfolio risk by examining their exposure to companies and sectors that are vulnerable to trade risk," Mr Lee said.
DBS equity market strategist Yeo Kee Yan said: "If you look at the STI component stocks, naturally exporters, such as tech manufacturing companies with plants in China and around the region, will be affected. The sectors that will outperform will likely be the defensives, for example the telcos, the utilities and the consumer staples."
This explains why Hutchison Port Holdings (HPH) Trust fell one US cent, or 3 per cent, to a five-year low of 32 US cents, while Venture lost $1.02, or 3.6 per cent, to finish at $27.63, he said. HPH Trust, being a container port business trust, will be affected by trade tensions.
Two counters that bucked the falling trend stood out. One was ST Engineering, the sole gainer in a sea of red among the "top 20 value traded" list. The stock rose 2 cents, or 0.6 per cent, to $3.49.
This came after UOB Kay Hian upgraded ST Engineering to "buy" with a target price of $4.10, while DBS Group Research raised its target price on the stock to $4.10, from $3.90 previously.
The other counter was offshore services provider Mencast Holdings, which added 1.5 cents, or 16 per cent, to end at 10.9 cents, after it announced $5.6 million of contracts from existing customers earlier this week.