The sell-off on Wall Street overnight dashed any hopes of gains on the local bourse yesterday, with the Straits Times Index (STI) logging its third straight day of losses.
Fundamentals have not changed, and analysts attribute the falls to profit-taking after November's bull run that sent the index up 1.8 per cent. But those heady days seemed far away yesterday with the STI losing 40.85 points, or 1.2 per cent, to 3,397.21. Most other Asian bourses saw red too, with Japan's Nikkei 225 losing nearly 2 per cent and Hong Kong's Hang Seng down 2.1 per cent.
United States stocks fell overnight as volatility returned and a technology rebound lost steam, while investors processed how a Republican tax overhaul would impact corporate earnings.
Meanwhile, upbeat projections are pouring in for 2018. Bank of America Merrill Lynch Global Research issued a bullish outlook. It sees robust global economic growth, steady US growth and solid stock returns that could peak in the first half. But it warned of signs that the bull market run is nearing the end and could trigger a mid-year pullback alongside potential for some of the best returns in the last gasps of the cycle.
Mr Michael Hartnett, its head of global investment strategy, said: "Investors are chasing growth and high-yielding assets in a bull market that's been driven and enabled by central bank liquidity. We see an end to this... once profits peak... and central banks start withdrawing liquidity."
Phillip Capital has kept its end-year target for the STI at 3,450 unchanged on the back of an uptrend in global macro indicators for the fourth quarter.
Banks led yesterday's losses with DBS Group down 56 cents, or 2.3 per cent, at $24.24. United Overseas Bank fell 52 cents, or nearly 2 per cent, to $25.80, while OCBC Bank slipped 38 cents, or 3 per cent, to $12.13.
Ms Margaret Yang Yan of CMC Markets warned that the dividend yields of the three banks are "stretched" to their lowest level in nearly a decade due to the recent rally, which should serve as a warning that current valuations are high and may not be sustainable.
Cosco Shipping International was one of the most actives with 27 million shares worth $13 million done. It closed unchanged at 48.5 cents.
Alliance Mineral Assets rose one cent, or 3 per cent, to 33.5 cents. The Australian miner said on Tuesday some 40.03 million shares belonging to substantial investor Living Waters Mining Australia were seized. The writ of seizure and sale was issued by Singapore's High Court.