Feb 10, 2016

    Panic selling may spill over here

    WHILE share investors here took a breather for the Chinese New Year break, punters in other markets were in no festive mood as they scurried for safe havens.

    Their panic selling could spill over in the Singapore bourse today as investors try to play catch-up after a long holiday weekend due to the Chinese New Year.

    "We will see volatility in the coming days as all kinds of permutations contribute to the market mood," Song Seng Wun, analyst with CIMB Bank, told The Straits Times.

    Yesterday's rout started in Tokyo as markets plunged more than 5 per cent, led by bank and brokerage shares.

    The Topix index sank 5.5 per cent to 1,304.33 while Nikkei 225 Stock Average lost 5.4 per cent to 16,085.44.

    The yen rose 0.7 per cent to 115.02 per dollar, after reaching 114.21, the strongest level since November 2014.

    Ten-year bond rates shed five basis points to below zero.

    Australian shares hit a 21/2-year low, joining the slump in global markets as sliding oil prices weighed on energy stocks and concerns about the health of banks. They could have slid lower if not for holidays in many centres.

    Markets from China to South Korea remained closed for the CNY holidays.

    Europe followed suit, with stocks declining for the seventh day. Europe 600 Index lost 0.9 per cent to 311.47 at 11.57am (7.57pm Singapore time) in London, slipping into so-called "oversold" territory.

    A gauge of banks slid to a 28-month low with Deutsche Bank reversing gains to fall 1.5 per cent even as it reassured investors that it has enough cash to pay its debts.

    "Investors had probably thought yesterday (Monday) we might have hit bottom but they've been crushed," Nobuyuki Fujimoto, analyst at SBI Securities in Tokyo told Bloomberg, referring to the market slide at the start of the week.

    "Greece, Deutsche Bank, shale gas - all we hear is bad news. Investors must have their heads in their hands right now."

    Gold was on track for its longest rally since 2011 while oil traded at about US$30 a barrel.

    All this has magnified the stakes for United States Federal Reserve chair Janet Yellen's testimony this week.

    "She needs to come across as optimistic without being too hawkish and cautious without being negative," said ANZ analyst Jo Masters.

    The Dow Jones Industrial Average pared an earlier 400-point decline to settle with a loss of 177.92 points, or 1.1 per cent, at 16,027.05 on Monday.

    "The 'fear factor' in markets has morphed from being about an emerging market hard landing and collapsing oil prices to being about the extent of the slowdown in the developed world and the ability of central banks to reflate asset values yet again," analysts at Citi said in a note.

    Roger Tan, chief executive of Voyage Research, told The Straits Times: "It has always been about the global economic slowdown. Oil prices and China data are just excuses to sell down equity." 

    He said while local markets make the occasional bull run amid signs of fiscal and monetary stimulus policies, new growth engines will be hard to find. "Slow and painful with occasional 'rain of hope' is going to be Singapore's outlook for the year," he said.