STI slips on concerns over circuit breaker

The Straits Times Index (STI) closed down 1.77 per cent at 2,551.92 yesterday, as punters braced themselves for bad news after Prime Minister Lee Hsien Loong said at 4pm that he would address the nation an hour later. When he did, he announced a four-week extension of the circuit breaker measures to June 1.

About 1.63 billion securities worth $1.47 billion changed hands yesterday. Losers outnumbered gainers 341 to 111. The most active counter was Biolidics, which recently got permission to market and sell its Covid-19 rapid-test kits in the United States. It jumped 40.79 per cent to 53.5 cents.

Sevak was the top gainer, rising 11.33 per cent to $1.67. Jardine Matheson was the top loser for the second day running, falling 2.1 per cent to US$50.40.

The market was especially bearish after May futures contracts for the US crude oil grade West Texas Intermediate (WTI) turned negative for the first time, as the Saudis mounted a squeeze on US shale oil producers. This is the first time that WTI has traded at less than half the price of Brent. But Bank of Singapore currency strategist Sim Moh Siong noted: "The WTI oil market is a reflection of the supply glut in Cushing, not a reflection of the international oil market, which more closely follows Brent crude. Additionally, unlike Brent, the WTI contract is settled through physical oil delivery. We continue to project Brent crude price to rebound to US$45 per barrel in a year's time."

The market is also weighing the fallout from the oil rout, not just of oil and gas players, but also of their counter parties, whose collateral may be worth a lot less than before.

In a report last Friday, UOB Kay Hian analyst Jonathan Koh estimated that DBS Group has a $400 million exposure to Singapore's insolvent oil trader Hin Leong: "Management disclosed that DBS' exposure to offshore-support vessels is currently at $3 billion, which is half the $6 billion at end-2016."

He said he expects DBS' net profit to fall by 25 per cent in the first quarter from the year-ago quarter when it reports on April 30. He is also expecting DBS to trim dividends by 9.1 per cent to 30 cents per quarter, supported by reactivating its scrip dividend scheme.

Regional markets were awash with red. Hong Kong and Malaysia were both down 2.22 per cent. Japan's Nikkei dipped nearly 2 per cent - mainly attributed to geopolitical risk fears following an unconfirmed report that North Korean leader Kim Jong Un was being treated after surgery.