Bulls And Bears

STI falls amid region's fears over China growth

Worries follow IMF's lower forecast due to US-China trade war

Local shares slipped for the fourth straight session yesterday, in line with regional markets hit by uncertainties over China's growth.

The International Monetary Fund (IMF) has lowered its forecast for growth next year to 6.2 per cent, down from 6.4 per cent, citing the United States-China trade war.

Investors across the region are understandably getting worried over prospects of a slowdown.

The glum mood saw the Straits Times Index (STI) shed 14.85 points, or 0.47 per cent, to 3,166.6 on turnover of 1.7 billion shares worth $991.3 million. Losers beat gainers 199 to 170.

Elsewhere, Tokyo's Nikkei 225 gave up 1.3 per cent, its fourth straight session of losses and one that left it at a three-week low. Hong Kong's Hang Seng was down for a sixth straight day, losing 0.11 per cent, while Australia's ASX 200 lost 1 per cent. Chinese markets were mixed, with Shanghai gaining 0.2 per cent while the Shenzhen bourse lost 0.1 per cent. South Korean markets were closed for a holiday.

The most active stock here was Nico Steel, which saw trade of 149.2 million while ending up 16.7 per cent at $0.007.

Singapore Exchange plunged 2.2 per cent, its largest one-day drop since July 30, to $7.08.

Credit Suisse analyst Rikin Shah downgraded the stock to "neutral" from "outperform" ahead of its first-quarter results on Oct 19. He cited lower securities turnover, above average relative valuation and a lack of strong catalysts.

Currency movements were in the spotlight as well, especially the yuan, which continued to slide even after the People's Bank of China intervened on Sunday.

"We will probably see more rainy days ahead if the Chinese yuan continues its depreciation trajectory," said CMC Markets analyst Margaret Yang.

IMF chief economist Maurice Obstfeld told Reuters in Bali that he is not concerned about the Chinese government's ability to defend its currency, noting that the yuan has often quickly recovered from periods of volatility in recent years.

However, FXTM chief market strategist Hussein Sayed said yesterday that the US could take issue with China's strategies. "The US administration may view the 9 per cent slump in the yuan over the past six months as a deliberate weakening to gain advantage in the trade war," he noted. "It will be interesting to see whether US Treasury Secretary Steven Mnuchin decides to formally label China a currency manipulator in next week's foreign exchange report."

A version of this article appeared in the print edition of The Straits Times on October 10, 2018, with the headline 'STI falls amid region's fears over China growth'. Subscribe