SINGAPORE - An initial rally over Friday's rebound in oil prices and speculation over central bank support in China, Japan and Europe, was undone as Singapore shares slid on a profit-taking relief rally Monday, sending the index below the key 2,600 level.
The Straits Times Index closed at 2,582.64, up 0.22 per cent or 5.55 points.
Keppel Corp and Wilmar International were the biggest laggards, as oil resumed its downward trajectory, reversing from early gains on short covering and heating oil demand sparked by a massive snowstorm that hit the United States East Coast over the weekend.
Keppel fell 4.2 per cent or 21 cents to S$4.81, while Wilmar International sank 2.5 per cent or seven cents to S$2.68.
DBS Group research, which has a 'hold' call on Keppel, said uncertainty over major client Sete Brasil is worrisome, and that the group is weighed down by its offshore and marine business.
"O&M outlook is plagued by the depressed oil prices. Rigbuilding is entering a prolonged cyclical downturn. Keppel secured S$1.8 billion non-rig new orders last year, a far cry from their usual S$4-S$6 billion wins. As a result, orderbook dwindled to S$9 billion, from $12.5 billion a year ago, implying declining earnings ahead," DBS said.
Market participants are eyeing the US Federal Reserve meeting later this week for clues on when the first rate hike of the year will occur. The Fed isn't expected to move this week, as expectations for rate hikes have been tempered by extreme market volatility at the start of the year, heightened geopolitical risk and the plunge in oil prices.
ANZ Research says Fed funds futures are pricing just 30 basis points worth of hikes by the end of 2016 versus 55 basis points priced at the end of 2015.
"The big question now is what the Fed is going to do later this week. A rate hike isn't expected this week because inflation hasn't hit targets yet. The recent oil price slump has pushed inflation data below expectations," remisier Alvin Yong said.
Banking counters and Singtel led the rally, with DBS Group up 2 per cent or 28 cents to S$14.15, UOB up 2.2 per cent or 38 cents to S$18, and OCBC up 0.6 per cent or five cents to S$7.77. Singtel jumped 0.3 per cent or one cent to S$3.47.
Innopac was the most actively traded counter, plunging 33.3 per cent or 0.1 cents to 0.2 cents, with 83 million shares traded. Noble Group also made the list, dipping 1.7 per cent or 0.5 cents to 28.5 cents, with 52 million shares traded.
UG Healthcare got queried by the Singapore Exchange over unusual price movements, its second query in the past three months.
Investors are still cautious as the local corporate earnings season is now in full swing. DBS Investment Insights cautioned that the longer-term trend will "still be downward as fundamentals remain challenging, and valuations have yet to become sufficiently attractive."
"So, by all means, ride the bounce. But don't overstay it," DBS said.
HSBC's co-head of Asian economic research, Mr Frederic Neumann, isn't upbeat about global growth prospects, noting that what worried investors the most was "that central banks may have spent all their ammo, leaving us exposed to another slump."