Business

Local stocks fall after bond sell-off

STI drops 0.8% to finish at 3,548 - the lowest in almost two weeks, with other Asian markets also declining

Wall Street's biggest pullback in more than four months dragged down the local bourse's key Straits Times Index (STI) yesterday - a tune that most other major Asian bourses also moved to following an overnight sell-off in government bonds that tested confidence in equities.

The STI sank 28.33 points, or 0.8 per cent, to finish at 3,548.74 - its lowest finish in nearly two weeks - with some 3.2 billion shares worth $1.6 billion changing hands.

The declines came ahead of US President Donald Trump's State of the Union address and a two-day meeting of the Federal Reserve's policy-making committee that wraps up today.

"While Asian markets turned soft after taking the overnight lead from the rise in global government bond yields on the back of growth optimism and aggravated inflation, this does not warrant a change in the longer-term trend, as of yet," said IG market strategist Jingyi Pan.

The sell-off in US stocks was led by technology stocks on the back of declining crude prices. But that may just be a blip, said most market watchers.

"The factors that supported the rally over the past couple of months are still in play: global synchronised growth, enthusiasm over the Trump administration's tax cuts and strong earnings growth," said ForexTime chief market strategist Hussein Sayed.

While the rise in global bond yields is not necessarily a bad thing - it reflects the strength of the economic recovery - the pace of the rise may create significant headwinds for equities in the days to come, he added.

ING's Asia-Pacific research head and chief economist Rob Carnell said the narrative on global growth has not changed, neither do investors suddenly like the US dollar nor has outlook of policy rates changed.

"In all likelihood, what has happened in equity markets will be viewed by the vast majority of investors as nothing more than a dip presenting them with a great buying opportunity," he added.

"If so, we can imagine equities resuming their uptrend, and long-dated bond yields doing likewise. The other important fact to bear in mind is that these trends are not just something that is happening 'over there'. Bond yields across the Asian region are also nosing slowly higher."

DBS led the losses in the local bourse, losing 19 Singapore cents, or 0.7 per cent, to $26.40.

It was followed by SingTel, which fell four Singapore cents, or 1.1 per cent, to $3.57. UOB slipped 38 Singapore cents, or 1.4 per cent, to $27.50, while OCBC retreated 16 Singapore cents, or 1.2 per cent, to $12.99.

QT Vascular jumped 0.2 Singapore cent, or nearly 12 per cent, to 1.9 Singapore cents and was the second most active counter with 268 million shares worth $5.3 million done after it resumed trading yesterday.

The Catalist-listed firm said it has completed the sale of Chocolate PTA balloon catheter to Medtronic yesterday.

Noble Group lost three Singapore cents, or 12 per cent, to 23 Singapore cents on news that it has reached a deal with creditors to restructure its debt pile.

The firm said on Monday that a group of senior creditors, who represent about 30 per cent of its bonds and revolving credit facility, has agreed to swap their debt for a combination of new debt instruments and equity in the restructured group.

Procurri slipped 0.5 Singapore cent, or 2.3 per cent, to 21 Singapore cents. The mainboard-listed firm said it expects to report a fourth-quarterly net loss.

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