Oil prices weigh on Singapore shares, STI ends 31 points down

SINGAPORE - Singapore shares lost their fizz after oil prices again fell below US$30 (S$42.20) a barrel as a deal between Saudi Arabia and Russia to freeze output failed to assuage anxiety over the oil rout.

West Texas Intermediate crude fell 0.4 per cent to US$28.92 a barrel, after sliding 1.4 per cent on Tuesday (Feb 16) on news that the two countries agreed to hold output near record-high levels, instead of cutting it.

Profit-taking on blue-chips knocked down the benchmark Straits Times Index by 1.16 per cent or 30.79 points to 2,613.79. Singtel fell 2.9 per cent or 11 cents to S$3.69, with 33.5 million shares traded; UOB sank 3.4 per cent or 61 cents to S$17.20, and DBS dipped 0.6 per cent or eight cents to S$13.60.

Traders are also watching the release on Thursday of minutes of the United States Federal Reserve's meeting last month, when officials had indicated they were monitoring market turmoil, which may delay further monetary policy tightening.

RHB Research, which has a neutral call on UOB, said its oil and gas exposure is manageable, but share price upside will be capped by concerns over still rising non-performing loans and a weak revenue outlook.

"There is a noticeable rise in NPLs in Singapore, Indonesia and China, but NPL ratio remained manageable while loan loss coverage is comfortable. Liquidity is healthy as management focused on growing current account and savings account deposits," it said.

UOB has total exposure of S$12.1 billion to the oil & gas industry as at December 2015. Its management is concerned about exposure to the upstream industries but believes that asset quality would remain manageable, and exposures are well collateralised.

"Management estimates about S$2 billion of exposure would be vulnerable should oil prices stay low for more than one year," RHB added.

The STI was also weighed down by StarHub, which fell 6.3 per cent or 24 cents to S$3.56. OCBC Investment Research, which downgraded its call to hold from buy, said the telco has "done very well in the run-up to its full year 2015 results, reducing total return to less than 9 per cent based on the current price".

DBS Group Research, which maintained a fully valued call on StarHub, said it preferred M1 to the telco.

"In case of the non-entry of the fourth telco, we see 27 per cent upside at M1 versus 8 per cent at StarHub," DBS said.

Meanwhile, Sembcorp Marine, whose stock gained 3.2 per cent or 5 cents to S$1.62, got queried by The Singapore Exchange on "unusual price movements".