Oil price dip, rate hike jitters hit stocks
SLIDING oil prices and jitters ahead of the first United States interest rate hike in nearly a decade kept Singapore shares in the doldrums yesterday.
The Straits Times Index (STI) fell 0.69 per cent or 19.59 points to 2,815.04, with 953.3 million shares worth $827.8 million changing hands.
Trading volumes were paltry as investors are staying on the sidelines ahead of the decision on US interest rates expected early Thursday morning, Singapore time.
"It's going to be a jittery week ahead, with no recovery in sight for oil prices, and the Dow collapsed on Friday ahead of the looming rate hike this week," remisier Alvin Yong said.
"We are hoping for anything between 25 and 50 basis points or less. That will be seen as a mosquito bite. Anything more than 50 basis points becomes a tiger's bite."
Said ABN Amro: "If the Fed increases interest rates as we expect, the US dollar could appreciate further, which would further weigh on US dollar-denominated oil prices."
Crude fell for a seventh straight session yesterday, leaving Brent below US$38 a barrel, its lowest point since December 2008.
Wall Street's 1.8 per cent plunge on Friday also weighed on STI constituents. Singtel was the leading laggard, sinking 1.3 per cent or five cents to $3.79 yesterday while Keppel Corp fell 2.2 per cent or 14 cents to $6.22.
DBS fell 0.5 per cent or nine cents to $16.32, OCBC slipped 0.93 per cent or eight cents to $8.54, and UOB was flat at $19.16.
Even though expectations are rife for a rate hike this week, there may not be much room for the local banks' net interest margins to rise significantly, DBS Group Research Equity said in a report last week.
Spackman Entertainment was the most actively traded stock, jumping 12.5 per cent or 1.7 cents to 15.3 cents, with 41.8 million shares traded.
Weaker oil prices took their toll on oil plays, including Ezra, which slipped 4 per cent or 0.4 cent to 9.6 cents, with 34.7 million shares traded. Yangzijiang Shipbuilding fell 3.15 per cent or 3.5 cents to $1.075, with 15.4 million shares traded.
Slow demand for palm oil and weak crude prices hit commodity plays: Golden Agri-Resources dropped 1.54 per cent or 0.5 cent to 32 cents; Noble Group fell 1.28 per cent or 0.5 cent to 38.5 cents and Olam International retreated 0.57 per cent or one cent to $1.76.