Bulls And Bears

STI sheds 2% on yuan plunge, trade tensions

Jardine-linked stocks and banks among big losers, with turmoil expected to continue

Local shares plunged yesterday on the back of a sharp fall in the yuan and renewed fears over the trade war.

The sombre mood in Singapore's birthday week sent the Straits Times Index (STI) down 66.6 points, or 2.04 per cent, to 3,194.51.

A day after US President Donald Trump announced new tariffs, the yuan breached a key level of seven to the US dollar, which FXTM chief market strategist Hussein Sayed said could hint at China's strategy for managing the impact of the tariffs.

"The (People's Bank of China) has spent hundreds of billions of dollars over the past couple of years to prevent (the yuan) from breaching this key level, but now that doesn't seem to be the case," he noted.

"In fact, the currency tool may be very effective as it significantly offsets the impact of US tariffs. If the Chinese currency falls by another 8 per cent from the current level, the 10 per cent tariffs paid by US importers will be offset by the (yuan's) weakness."

Turnover here was 1.2 billion shares worth $1.39 billion, with losers thumping gainers 378 to 111.

The STI was a sea of red amid heavy trading for many of its constituents, including Yangzijiang Shipbuilding, which led the active counters. It fell 2.8 per cent to $1.38 on trade of 54.1 million shares.

The only STI stock to end in the black was Ascendas Real Estate Investment Trust (Reit), which added 0.3 per cent on a volume of 13.7 million units to close at $3.06.

Reits made up a considerable portion of active counters, ending mostly lower although seven managed to eke out small gains.

Mapletree North Asia Commercial Trust retreated 4.3 per cent to $1.33, with 26.1 million units changing hands. Its properties are in prime locations in Hong Kong, China and Japan, noted Singapore Exchange market strategist Geoff Howie, who added that Reits were Singapore's second-strongest sector, after technology, for the first seven months of this year.

DBS shares took a hit, ending at $25.29 after retreating 3.7 per cent. OCBC Bank and United Overseas Bank also ended lower.

The five Jardine-linked counters were the biggest drag on the index, led by Jardine Matheson Holdings with a 5.7 per cent drop to US$57.38.

Yesterday's bloodshed could continue all week, said Oanda senior market analyst Edward Moya. "Financial markets are likely to remain jittery this week awaiting incremental updates on China's response to Trump's latest trade escalation and for further clarity from Fed officials on... rate cuts," he wrote in a note.

A version of this article appeared in the print edition of The Straits Times on August 06, 2019, with the headline 'STI sheds 2% on yuan plunge, trade tensions'. Print Edition | Subscribe