Yes or no, fallout from Greek vote may not last

KEY VOTE: Greeks went to the ballot box yesterday, to decide whether they would accept the austerity measures proposed by creditors in exchange for further bailout funds.


    Jul 06, 2015

    Yes or no, fallout from Greek vote may not last

    FOLLOWING a week of apprehension as investors pondered their strategies ahead of Greece's referendum yesterday, one should be mindful that its impact on regional markets may be shortlived no matter which way voters go, say analysts.

    The referendum yesterday was to decide whether the Greeks accept the austerity measures proposed by creditors in exchange for further bailout funds. A "no" outcome will potentially spell the country's exit from the euro zone, which may rock financial and capital markets everywhere.

    Results were not yet out as of press time, but opinion polls showed that the Greeks were evenly split on the matter.

    "Whatever happens, there will be knee-jerk reactions - a 'no' outcome will certainly rock the markets. But the impact will not be long term, just as a 'yes' outcome is still a very long way from the resolution of the Greek debt crisis," said CMC Markets analyst Nicholas Teo.

    At home, concerns over Greece had not triggered a major retreat as some expected. The benchmark Straits Times Index (STI) gained 0.66 per cent last week to end at 3,342.73, despite a scare on Monday when the index slumped 1.23 per cent.

    This was markedly different from the mood on Wall Street, where the Dow Jones Industrial Average was hit by its biggest weekly drop since April, while the S&P 500 had its worst week since March.

    In the week ahead, local stocks may in fact edge up due to non-Greece factors, Mr Teo noted.

    "I believe the market will go moderately higher this week, as overseas funds take their flight for safety. That was already evident from last week's STI gain, which unfolded alongside the major whack-down in China."

    China's main indices have slumped 30 per cent in the past three weeks, as fears intensify that a major crash is imminent. A very concerned Beijing has been stepping up its efforts to calm the market, including decisions in the last two weeks to cut the interest rates, relax margin-lending rules and curb new listings.

    Over the weekend, major brokers and fund managers there have also pledged to invest at least US$19 billion (S$26 billion) to steady the stock market.

    Despite the bearish signs, most market watchers believe the Chinese market is not teetering on the edge, as there is no lack of political will and capacity in China - including further cuts to its relatively high 4.85 per cent interest rate to boost liquidity - to prevent a major crash.

    Back in Singapore, banking continues to be a key market theme, as DBS Bank, OCBC Bank and United Overseas Bank are certain to enjoy better spread going forward, when the Federal Reserve hikes interest rates in the United States. The bank stocks are also not considered overpriced, given their price-to-earnings ratio ranging from 10 to 12.

    The offshore and marine sector, however, is still in a rough patch, as oil prices are not showing any signs of stabilising. It does not help that key plays in the sector - such as rig-making blue chips Sembcorp Marine and Keppel Corp - are still struggling to get new major orders.

    Mr Teo said: "These companies have shown that they are slow to benefit from oil price gain - they are more susceptible to contract winds, in which case they have yet to win major new contracts since the start of this year. Things aren't looking good for them, and may look worse still going forward."

    Sembmarine shares have dropped 12.9 per cent so far this year to $2.84, while Keppel Corp shares have pared 7 per cent to $8.23.