Feb 04, 2016

    Falling oil prices fuel another rush for exit

    ASIAN markets went on a full retreat yesterday, with investors bailing out on concerns over plunging oil prices.

    Brent futures continued their slide to fall below US$33 a barrel on news that Iran is planning to ramp up its production.

    The oversupply concerns rocked energy shares on Wall Street, sending the Dow Jones Industrial Average down 1.8 per cent overnight.

    This spooked the regional markets into another sell-off, led by Tokyo's 3.15 per cent drop.

    Shanghai fell 0.38 per cent while Hong Kong lost 2.34 per cent, despite the People's Bank of China's move to cut the downpayment requirement for mortgages in another move to ease monetary policies.

    Singapore's Straits Times Index was also in the red, closing 28.49 points or 1.1 per cent down at 2,550.74.

    The volume was again lacklustre, with only 644.4 million shares worth $902.4 million changing hands.

    Amid the bearish signs, market watchers are divided in their take on the market outlook. Bank of Singapore chief economist Richard Jerram said the sell-off has been overdone.

    "There is a high level of nervousness right now, with markets having violent swings on minimal new information and speculation expectations. In Singapore, valuation has dropped some 11 per cent since the start of the year," he told The Straits Times.

    "But we do not see a need to panic... That is why we have changed our stance for equities from neutral to overweight this week."

    The data on STI reflected as much.

    The overall price-to-book value ratio of the STI is now just above parity at 1.02 while the dividend yield is at 4.7 per cent, the index's highest since 2008.

    However, DBS chief investment officer Lim Say Boon noted the combination of potential risk factors, including China's slowdown, United States manufacturing recession and further yuan devaluation.

    "None of this has to happen but these are not trivial risks either," Mr Lim said in a note yesterday.

    Whatever the outcome, local investors do not plan on sticking around to find out, and their exit led to 20 of the 30 STI constituent stocks closing lower yesterday.

    Hongkong Land Holdings dropped the most among the blue chips, down 40 US cents (57 Singapore cents) or 6.48 per cent to US$5.77.

    Wilmar International shed eight cents or 2.75 per cent to $2.83.

    OCBC Bank closed down 14 cents or 1.83 per cent at $7.49 while DBS Bank lost 24 cents or 1.78 per cent to $13.27.

    But United Overseas Bank managed to gain, rising 11 cents or 0.63 per cent to $17.50.

    Golden Agri-Resources was the top gaining blue chip, ahead one cent or 2.86 per cent to 36 cents.

    Outside the STI, Frasers Centrepoint dropped seven cents or 4.15 per cent to $1.615, ahead of its results announcement yesterday.

    The real-estate group recorded a 47.2 per cent year-on-year drop in net profit in the three months to Dec 31 as returns in Singapore tapered off.