Mar 21, 2014

    STI slides on interest-rate hike worries

    CONCERNS that the United States will hike interest rates earlier than expected left regional shares floundering in a sea of red yesterday.

    The sell-off was sparked by overnight comments by US Federal Reserve chairman Janet Yellen that the central bank might end its massive bond-buying programme this year and start raising rates around six months later.

    "We're going to see more follow-through selling in Asia," Sydney-based Toby Lawson, head of futures, options and cash equities trading for Asia-Pacific at Newedge Group, told Bloomberg.

    "It's significant that the Fed fund rate will rise to 1 per cent by the end of next year. We could see capital outflows from emerging markets back into the US."

    Concerns of that nature sent the benchmark Straits Times Index (STI) down 23.55 points, or 0.76 per cent, to 3,057.20 and its second straight session in negative territory. About 1.6 billion units worth $1.1 billion changed hands.

    "There was some selling today, but investors were not rushing for the exit. Overall, it's still a fairly quiet market," said a Singapore broker.

    Losses were more pronounced in other major Asian markets, with Japan sliding 1.65 per cent, Hong Kong tanking 1.79 per cent and Shanghai slipping 1.40 per cent.

    Back home, 26 of the 30 STI component counters finished lower, with just two gainers and two unchanged.

    The losers included Global Logistic Properties, which hit its lowest levels in more than nine months en route to falling six cents to $2.58.

    CapitaMalls Asia also tumbled, down 3.5 cents to $1.685 amid heavy trading as it headed for its worst finish since October 2012. Investors were spooked by the prospect of rising rates and a China economic slowdown.

    All three bank stocks lost ground, with DBS Group Holdings dropping nine cents to $15.66, United Overseas Bank shedding four cents to $20.15 and OCBC Bank slipping six cents to $9.24.

    Suntec Reit was in the limelight after announcing on Wednesday that it will be issuing 218.1 million new units at $1.605 apiece via a private placement. The counter dipped 0.5 cent to $1.64.

    OCBC Investment Research noted: "The move came as a surprise to us, as Suntec had expressed explicitly that it has sufficient resources to fund its growth plans just a quarter ago... we believe that it may possibly be beefing up its financial strength for potential growth opportunities in the near term."

    The day's most active counter was HanKore Environment Tech, which closed 0.1 cent up at 14.4 cents with 201.85 million units done.