May 29, 2015

    China stocks' dive drags S'pore along

    THE Singapore market had to choose between following Nasdaq's record close on Wall Street and the shocking 6 per cent slump of China stocks yesterday.

    Investors naturally decided on the latter, as China shares fell the most in four months on record turnover - and as players fretted that Beijing might implement measures to curb the market's recent ebullient run-up.

    "In view of the large correction in China, Singapore went lower. There are curbs on loans (in China), a fundamental shift for the market," said Desmond Leong, a remisier at Phillip Securities, referring to moves by brokerages in the country to tighten margin lending rules.

    The Straits Times Index closed 7.17 points or 0.21 per cent lower to 3,417.77.

    Overnight, Wall Street had rallied with the technology-heavy Nasdaq Composite Index hitting a new peak.

    But news of the heavy falls in China came fast and furious from yesterday morning, pulling down Hong Kong and Singapore.

    Stocks in China, the world's second-biggest economy, have jumped more than 140 per cent in the past 12 months despite a flagging economy.

    The Chinese central bank yesterday drained money from cash-flush financial institutions by selling them bond repurchase agreements behind closed doors. The move raised fears of further measures by the authorities to reduce stock market leverage.

    "The whole nature of the China market, it's all on leverage, all on margin trading, so margin calls will further push the market as retail investors are forced" to put up more funds, Michael-Douglas Lee, a Hong Kong-based trader, was quoted as saying by Bloomberg.

    Still, it was not all doom and gloom in Singapore, with several positive stories from the earnings front and research reports.

    Shares of property and hotels group City Developments rose six cents to $10.41. Barclays upgraded CityDev to "overweight". It said with 68 per cent of CityDev's land bank earmarked for luxury homes, it stands to benefit from an expected rebound of luxury home prices.

    Fu Yu Corp rose two cents or 11.2 per cent to 19.5 cents. Phillip Securities said the precision tooling and assembly firm "has a high 7 per cent potential maiden dividend yield, is trading at undemanding valuations".

    United Envirotech reported a record net profit of $62.4 million for the 12 months to March 31, a 197 per cent increase from the previous year.

    Stockbroker Maybank Kim Eng maintains a "buy" call for the water-treatment company, with a higher target price of $2 from $1.93. The stock, which rose 20 per cent in the last six months, dipped five cents to $1.765.