Feb 26, 2016

    Bears maul markets over weak oil prices

    SINGAPORE shares kept sliding yesterday, with investors again unnerved by weak oil prices. Beleaguered offshore and marine plays took another beating, and the banking stocks were also sold down amid fears over credit quality.

    The benchmark Straits Times Index made an upbeat start but quickly lost steam and kept dropping through most of the session to close 16.56 points, or 0.63 per cent, lower at 2,603.4. In all, 1.12 billion shares worth $1.01 billion were traded.

    Markets in Greater China were also grim, as Shanghai nosedived 6.41 per cent and Hong Kong slid 1.58 per cent.

    With China's vast manufacturing economy struggling, the February purchasing managers' index is expected to show further contraction, forecasts by analysts in a Reuters poll showed. The data will be out next Tuesday.

    Overnight, Dow Jones Industrial Average rose 0.32 per cent after a late rally as investors welcomed a brief recovery in the oil price. But the upturn did not hold yesterday, and crude oil benchmark Brent futures dipped below US$34 per barrel again.

    Unsurprisingly, Sembcorp Marine lost the most among the 18 STI constituents that fell, highlighting a sell-off bias towards the marine and energy plays in the down-cycle.

    Sembcorp Marine slumped 8.5 cents or 5.43 per cent to $1.48, its fourth day in the red. Sembcorp Industries shed 10 cents or 3.8 per cent to $2.53. Keppel Corp pared four cents or 0.79 per cent to $5.01.

    These woes also hurt the banking stocks.

    DBS Group Holdings lost five cents or 0.37 per cent to $13.35, OCBC dropped 18 cents or 2.24 per cent to $7.84, and United Overseas Bank shed 20 cents or 1.18 per cent to $16.81.

    The local banks are commonly seen as a bellwether for economic conditions and corporate sector performance.

    Their exposure to struggling borrowers, particularly in the oil and gas sector, is worrying market watchers.

    Moody's senior credit officer Eugene Tarzimanov said in a note yesterday: "We expect that the asset quality of all three banks will continue to deteriorate because of slowing economic and trade growth in Asia, and increasing stress for oil and gas borrowers in Singapore."

    Property-related STI counters fared better. CapitaLand Mall Trust was up five cents or 2.43 per cent to $2.11, and CapitaLand gained two cents or 0.7 per cent to $2.88.

    Ascendas Real Estate Investment Trust rose one cent or 0.43 to $2.35, and City Developments put on five cents or 0.71 per cent to $7.09 after unveiling record earnings of $410.5 million for the Dec 31 quarter.

    Outside the STI, Yuuzoo Corp was one of the top active penny plays. It rose 0.3 cent or 1.81 per cent to 16.9 cents, on 49.6 million traded shares.

    Spackman Entertainment dropped 0.7 cent or 5.22 per cent to 12.7 cents, with 143.1 million shares traded. Shares of the film company have surged in price since the middle of the month and punters may look to take profit soon.