Jan 28, 2014

    STI at 4-month low despite 2nd wind

    LOCAL shares dived to a four-month low yesterday on fears of financial instability in China, although a late rally eased some pain for investors.

    The benchmark Straits Times Index lost 33.56 points or 1.09 per cent to 3,042.43, a level not seen since September last year.

    It could have been worse, though. The index recovered about seven points in the last hour, after news broke that a China trust fund had agreed on a deal to restructure a problematic product.

    The firm, China Credit Trust, is a large player in China's "shadow banking" sector and its woes had sapped investor confidence all day.

    "There was a bit of short covering in the last hour of trading," said remisier Alvin Yong.

    However, the news of the restructuring broke too late to save Hong Kong, which had already closed. The Hang Seng Index tumbled 2.11 per cent.

    There were also fears ahead of a United States central-bank meeting this week, with investors fretting that the Federal Reserve will make further reductions in its money-printing programme.

    "There is debate as to whether the market correction would influence the Fed's stance on gradual easing," according to a note by NetResearch Asia.

    "There are calls that movements in the equity markets should not influence this decision to ease its bond-buying programme, and that more uncertainty would result if it didn't stick to its earlier stance."

    It was a sea of red on the 30-member STI, with 25 losers, two gainers and three stocks unchanged.

    Hefty decliners included Jardine Cycle & Carriage, which slumped $1.59 or 4.2 per cent to $35.92. It has a large business interest in Indonesia, thanks to its stake in PT Astra International.

    That leaves Jardine Cycle & Carriage vulnerable to declines in the Indonesian rupiah, which dropped 0.4 per cent against the US dollar yesterday to lead declines in Asian currencies.

    It was a tough day for OUE Commercial Reit to make its debut, but it managed to close the session at 80 cents, unchanged from its initial public offering price.

    The office landlord traded as low as 77 cents during the session, but recovered by the closing bell.

    Volumes were higher than those of many recent sessions, with 2.45 billion shares worth $1.34 billion changing hands.

    That was up from Friday's 2.23 billion shares worth $1.05 billion. Investors could have been keen to exit their positions ahead of the holidays later this week.