S'pore stocks slump on regional outflow
SINGAPORE stocks tumbled by the most among developed markets last month as investors pulled cash from South-east Asia on concern about the future of global stimulus.
Singapore's Straits Times Index, the benchmark gauge for the region's biggest market, dropped 7.5 per cent in the 10 days through Aug 28, its longest losing streak since 2002.
The gauge slumped 6 per cent last month, the worst performance among the world's developed equity markets. Jardine Cycle & Carriage, the largest shareholder of Indonesia's PT Astra International, and commodities trader Olam International led declines.
Stocks in South-east Asia sank faster than global equities on signs that regional economic growth is slowing and as Federal Reserve policymakers prepare to reduce US bond buying that had prompted investors to buy riskier assets.
Investors pulled US$2.2 billion (S$2.8 billion) from Thailand, Indonesia and the Philippines last month, after ploughing US$6.8 billion into the markets last year, data compiled by Bloomberg showed.
"Singapore is a barometer for South-east Asia," Mr Wellian Wiranto, Singapore-based Asian investment strategist at Barclays' wealth-management unit, said in an interview on Wednesday.
"Choppiness elsewhere brings ripples here. Investors are probably concerned about the risk of contagion amid capital outflows from neighbouring markets like Indonesia and the Philippines."
The Straits Times Index has slumped 12 per cent since Fed chairman Ben Bernanke said on May 22 that the central bank may start tapering US$85 billion in monthly US bond purchases if the world's biggest economy improves.
The index finished higher yesterday by 26.78 points, or 0.88 per cent, to close at 3,055.72.
The city's stock market benefited from loose monetary policy in the past few years as shares offered investors attractive dividend yields, said Mr Khiem Do, Hong Kong-based head of multi-asset strategy at Baring Asset Management.
Policymakers were "broadly comfortable" with Mr Bernanke's plan, minutes of their last meeting showed. The Fed will probably begin paring bond purchases when it next meets on Sept 17 and 18, according to 65 per cent of economists surveyed by Bloomberg last month.
"Singapore has been affected by redemptions from Asean since it's the biggest market," Mr Do said. "It's being lumped together with Indonesia, Thailand and the Philippines, where capital outflows have accelerated."
However, UBS said Singapore was its preferred market in Southeast Asia, upgrading its rating from neutral.
"Singapore is likely to outperform," chief investment officer for the southern Asia-Pacific Kelvin Tay said. "Singapore's strong currency, resilient domestic economy, good earnings-growth potential and exposure to developed markets' recovery make it appealing to foreign investors."
The nation's economic growth rate accelerated to 3.8 per cent in the second quarter from a year earlier as services industries expanded, offsetting weaker exports.