STI's 0.9% fall led by tumbling oil prices, weak Wall Street

THE local bourse felt the negative vibe that swept across Asia owing to the risk-off tone overnight in Wall Street as oil prices tumbled and the outlook of US tax reforms remained uncertain, with the key Straits Times Index notching up its fourth straight day of losses.

The STI retreated 30.39 points or 0.9 per cent to finish at 3,368.7 on Wednesday. Other key Asian bourses followed suit, with Taiwan's Topix tumbling nearly 2 per cent, Japan's Nikkei 225 down 1.9 per cent, Hong Kong's Hang Seng falling 1 per cent and China's Shanghai Composite losing 0.8 per cent.

Analysts also thought the correction was waiting to happen, given the extended rally in global financial markets in recent months. Global stocks markets continued their bull run in October, which was largely led by rising confidence as a result of the strength and breadth of the recovery in emerging and developed economies.

"With less than two months to go until the year end, investors are harvesting good returns so far for this year and squaring off position could lead to unconventional risk on/risk off market patterns," said DBS Group Research.

Tumbling oil prices gave a good excuse for profit-taking. Oil prices fell after the International Energy Agency (IEA) raised doubts over the outlook for next year and lowered its forecast for crude demand on recovering prices and a mild early winter that could weigh on purchases.

The news follows recent gains in oil prices that were fuelled by a production cut by Opec and tensions in the Middle East.

Still, DBS Group has a sanguine outlook on the direction of oil prices and has raised its average Brent crude oil price forecast for next year by US$5 to US$60-65 per barrel. "It is time to position for oil and gas recovery as early signs of improvement are seen in the value chain," it said in a recent report.

The closely watched European Central Bank conference on Tuesday did not directly mention rates but there seems to a concerted effort from key central banks on "talking investors out of easy money", said Maybank FX Research.

"This should imply a slow brewing process of monetary stimulus removal. It should not warrant a persistent sell-off in risk assets if economic growth continues to firm and can be broadly felt across sectors/industries benefiting consumers, corporates, etc. But we do not rule out knee jerk (risk-off plays) reaction heading into year-end," said the research house.

Turnover on the local bourse stood at some 2 billion shares worth $1.3 billion versus the previous day's 2.6 billion shares worth $1.7 billion. Losers outpaced gainers with 323 counters seeing declines and 134 counters up.

Singapore's three banking stalwarts closed in the red with DBS down 15 Singapore cents or 0.6 per cent at $23.61. OCBC lost 14 Singapore cents or 1.2 per cent to $11.55 while UOB slipped 19 Singapore cents or 0.8 per cent to $24.88.

RHT Health Trust jumped 8.5 Singapore cents or 10.5 per cent to 89.5 Singapore cents. Its controlling shareholder Fortis Healthcare has proposed to acquire the trust's entire asset portfolio for 46.5 billion Indian rupees (S$965.95 million). Both parties have entered into a term sheet to negotiate exclusively for 60 days.

Olam International fell 5 Singapore cents or 2 per cent to $2.23. The company's earnings scorecard for the third quarter saw net profit grow nearly 18 per cent to $24 million from a year ago on the back of a 42 per cent increase in revenue to $6.71 billion.