Dec 02, 2014

    Investors jump ship on energy, marine shares

    TUMBLING oil prices triggered a sell-off in local energy- and marine-sector shares yesterday and sent the overall market sliding.

    Investors bailed out on concerns that these firms face the prospect of rig-building orders and offshore support vessel construction and maintenance contracts being modified or cancelled, and profit margins squeezed.

    The benchmark Straits Times Index plunged 44.86 points to 3,305.64, with Ezion Holdings and Mirach Energy among the top active stocks.

    Ezion slipped nearly 16 per cent or 21 cents to $1.115, with 83.6 million shares changing hands, while Mirach Energy plunged 20 per cent or 2.4 cents to 9.4 cents, with 51.4 million shares changing hands.

    Remisier Alvin Yong said: "The majority of trading volume in Ezion's shares is selldown volume or where sellers are selling to buyers at bid price.

    "If the stock comes down by a certain percentage, it may trigger margin calls or brokers force selling Ezion shares in the open market in order to pare down clients' margin loans. From the way the stock fell this morning, there was likely some margin selling today."

    Brent crude plunged to a four-year low of US$68.25 a barrel after the Organisation of the Petroleum Exporting Countries decided last week to maintain production levels, which will keep crude prices low. The price has fallen by about US$40 per barrel in five months.

    "The collapse in oil prices is spreading panic in the market, triggering concerns of temporary oversupply in the market, and concerns over slow economic growth in Japan, the euro zone and China," said Mr Yong.

    "There's a shift in investors' interest. They are selling out of oil and gas and rebalancing their portfolio into logistics and transport companies."

    But amid slumping oil prices, there are also clear winners - including airlines, logistics and shipping companies - whose bulk of operating costs is fuel costs, Mr Yong noted.

    Tigerair was among the top volume performers, soaring nearly 18 per cent or 5.5 cents to 36.5 cents, with 26.9 million shares changing hands.

    "Despite the sharp drop in oil prices, many airlines have yet to cut fuel surcharges, which are an additional source of revenue for the airlines," Mr Yong said.

    Shipping giant NOL was another winner, up 2.4 per cent or two cents to 84 cents, with 14.3 million shares changing hands.