Bulls And Bears

Falling bond yields lead to market jitters

Trading sentiment weakens as their swift decline raises spectre of recession

Falling bond yields in major economies raised the spectre of recession and rattled market watchers across the region yesterday.

The Straits Times Index (STI) here experienced a near repeat of Wednesday's performance, erasing nearly all intra-day gains to close just 5.19 points or 0.16 per cent higher at 3,203.58.

"The rapid and persistent decline in bond yields is unnerving investors about the economic outlook," said London Capital Group's research head Jasper Lawler.

Trade levels here were muted with 1.08 billion shares worth $866.62 million done as losers outnumbered gainers 195 to 173.

CGS-CIMB remisier Ernest Lim said markets are likely seeing lacklustre trading because most of the positive news has already been priced in.

Investors showed more interest in second liners yesterday, with penny stocks making up the top six by volume traded.

QT Vascular led the way with 106.5 million shares traded before closing flat at 0.4 cent.

Remisier Charles Chua said the high volume was probably on speculative trading and talk of an acquisition by the medtech firm, which makes balloon catheters.

ISR Capital closed flat at 0.2 cent on trade of 73.2 million while JCG Investment, also unchanged at 0.2 cent, saw 45.6 million shares change hands.

CapitaLand continued to build on Wednesday's gains of 1.44 per cent a day after the Urban Redevelopment Authority unveiled plans to further develop the areas of Jurong and the Greater Southern Waterfront. The developer added 1.14 per cent to $3.56.

Nomura research analyst Sai Min Chow noted on Wednesday that when CapitaLand's acquisition of Ascendas-Singbridge is completed, it will be able to explore opportunities for redevelopment and rejuvenation in the enlarged portfolio.

As the first quarter comes to a close, regional markets have fared relatively well. UBS noted that Asia ex-Japan equities have rebounded 12 per cent in the past three months after falling 9 per cent in final quarter of last year.

However, the recovery may be short-lived. UBS analysts noted: "The rally belies disappointing economic activity and softer inflation in Europe, the United States-China trade spat, and downgrades to corporate earnings expectations.

"(This is) a disconnect that has made investors question the rally's durability."

A version of this article appeared in the print edition of The Straits Times on March 29, 2019, with the headline 'Falling bond yields lead to market jitters'. Print Edition | Subscribe