Bulls And Bears

US-China trade impasse weighs on local shares

Banks, making up 40% of STI, cast shadow on index amid uncertainties

Local shares paid the price yesterday for the trade deadlock between the United States and China.

The market enjoyed a modest rebound last Friday on hopes that talks could bear fruit, but that optimism has vanished - the Straits Times Index (STI) closed at 3,234.28, down 39.22 points or 1.2 per cent.

Australia, China, Japan, Malaysia and South Korea all ended lower. Hong Kong, closed for a holiday, will resume trading today.

Trading volume here clocked in at 760.37 million shares worth $1 billion, with losers outpacing gainers 279 to 118, including 22 STI stocks trading in the red.

The index was weighed down by the banks, which make up 40 per cent of the STI's total weighting.

DBS Bank fell 2.1 per cent to $26 after a Citi Investment Research downgrade of the bank to "neutral" due to its exposure to China amid uncertainties over trade.

OCBC Bank was not spared either, closing 1.7 per cent lower at $11.20 as Phillip Capital downgraded it to "accumulate" due to an increase in its credit cost forecast.

That said, UOB Kay Hian remains overweight on the Singapore banking sector, with "buy" calls on DBS, with a target price of $30.50, and OCBC at $14.62. United Overseas Bank dropped 1.7 per cent to $25.18.

ThaiBev was sold off after it posted a 12 per cent dip in second-quarter net profit, although the results were in line with street expectations and most research houses maintained their calls on it. It was the most traded counter, with 71.6 million shares changing hands as it fell 7.3 per cent to 76.5 cents.

"It was likely a combination of a price correction after the counter's surge this year and being sold down following its results," a remisier said.

ST Engineering bucked the trend. The firm, which releases first-quarter results on Thursday, advanced 0.5 per cent to $4.04.

"It looks like the market is anticipating a good set of results from ST Engineering and investors may also view the company as a defensive stock amid the trade talks' negative development," said UOB Kay Hian's vice-president of equities and financial products Brandon Leu.

Market watchers also noted that investors are shifting to other defensive stocks like real estate investment trusts, given trade concerns.

A trader noted: "The market dip presents opportunities to purchase stocks in companies with good cash reserves, but do not make huge purchases, just nibble, as there is still a lack of clarity on how much further the market may drop."

A version of this article appeared in the print edition of The Straits Times on May 14, 2019, with the headline 'US-China trade impasse weighs on local shares'. Print Edition | Subscribe