Jan 15, 2015

    STI slips as oil takes toll on commodities

    LOCAL shares retreated yesterday as a continued slump in crude oil began to drag down other commodities amid concerns over slowing global economic growth.

    The benchmark Straits Times Index (STI) lost 0.5 per cent or 14.91 points to close at 3,326.16.

    Its fall was in tandem with other major markets across Asia. Hong Kong and Shanghai were both down 0.4 per cent, while Tokyo tumbled 1.7 per cent. Seoul slipped 0.2 per cent and Sydney retreated 1 per cent.

    This broad decline came as prices of Brent crude oil traded in London fell nearly 2 per cent to less than US$46 per barrel yesterday, before rallying slightly above that level.

    The slide in crude oil also spread to other commodities such as metals.

    Copper traded in London sank as much as 8.7 per cent to US$5,353.25 (S$7,153.28) a tonne, its lowest intraday price since July 2009, according to a Bloomberg report.

    Nickel slid 2.7 per cent, zinc tumbled 2.2 per cent and lead dropped 2.5 per cent.

    "Oversupply and falling demand are dragging down commodities beyond oil," said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank in Tokyo. "As an investor, it's hard to proactively take on risk at the moment."

    The World Bank also warned on Tuesday night that a strengthening United States economy would not be enough to offset deepening troubles elsewhere.

    It pointed to the euro zone's financial troubles, recession in Russia and slowdowns in emerging markets such as China, the world's biggest consumer of copper.

    All eyes are now on US retail sales data released last nightand upcoming figures on the euro zone's industrial output, which could affect its proposed monetary-stimulus programme.

    In Singapore, commodities-trading companies such as Golden Agri-Resources and Noble Group were among the most active stocks yesterday.

    Golden Agri closed flat at 46 cents, with 37 million shares traded, while Noble fell 1.5 cents to $1.01 on 32.3 million shares done.

    Other counters that weighed down the STI yesterday included the three local banks and Ascendas Real Estate Investment Trust (A-Reit).

    OCBC dropped 16 cents to $10.28, DBS Group Holdings slipped seven cents to $19.98 and United Overseas Bank lost 13 cents to $23.23.

    A-Reit fell 11 cents to $2.42, as traders took profit after the counter touched a 52-week high of $2.53 on Tuesday. It is due to announce its third-quarter results next Thursday.