STI pares losses after Chinese equities rebound over stimulus expectations

A file picture of investors at a securities exchange firm in Shanghai.PHOTO: BLOOMBERG
A file picture of investors at a securities exchange firm in Shanghai.PHOTO: BLOOMBERG

SINGAPORE - The Singapore bourse pared losses on Tuesday after Chinese equities staged a rebound following new measures to curb short-selling and on expectations of further stimulus after factory gauges showed a weakening manufacturing sector.

The Straits Times Index fell as much as 17.32 points or 0.5 per cent earlier before clawing back some ground to close down 1.75 points or 0.05 per cent at 3,191.04.

"This is a good time to bargain hunt if you believe the Chinese government is going to add further stimulus to support growth," a local remisier said.

The Chinese central bank has room to cut interest rates further and China's US$3.69 trillion (S$5 trillion) of foreign-exchange reserves and relatively low national government debt levels mean it has the ammunition for fiscal stimulus.

Chinese regulators have now banned intraday short-selling, requiring traders to wait one day before returning the borrowed shares.

The rationale behind the move was that intraday short-selling has increased 'abnormal' price movements in stocks, which heightened market volatility. The restriction would therefore push out day traders and helped stabilise the stock market, IG market strategist Bernard Aw said.

Meanwhile, Noble continues to be the most actively traded counter as shortcovering drove the stock up nearly 28 per cent or 13 cents to 60 Singapore cents, with 263.2 million shares traded.

"Traders are covering back shorts just in case the company surprises on the upside for its second-quarter earnings, and ahead of the long SG50 weekend. Many traders won't hold positions over the long weekend because the Singapore market won't be open for them to react to macro-economic news or changes in other markets," the remisier said.

Positive sentiment from the rebound in Chinese equities also spilled over into S-chip plays, which dominated the most actively traded list. Stratech Group jumping 14.5 per cent or 0.9 cent to 7.1 cents, with 108.6 million shares traded. Chinese Global skyrocketed 38.7 per cent or 1.2 cents to 4.3 cents with 77.7 million shares traded.

Debao Property soared 54.5 per cent or 1.8 cents to 5.1 cents, with 72.1 million shares changing hands and Qingmei surged 43.8 per cent or 0.7 cent or 2.3 cents, with 64.3 million shares traded.

Meanwhile, looming interest rate hikes continued to weigh on sentiment after the latest round of encouraging economic data from the United States.