Business

Shaky start to week as STI falls 18 points

Fears over US President's immigration ban has spilt into Asian markets

This week's shaky start for the US markets, spooked by US President Donald Trump's immigration ban, has spilt over to Asian bourses, with Singapore shares closing lower on the first day of trading after the Chinese New Year weekend.

The benchmark Straits Times Index (STI) lost 18.05 points or 0.59 per cent to end yesterday's session at 3,046.80, after reversing from its intraday high of 3,056.32. Turnover was average at 1.3 billion units worth $1.1 billion. Losers outnumbered gainers 215 to 192.

Regional markets were not spared either, with Tokyo's Nikkei 225, Australia's S&P/ASX 200 index, New Zealand's benchmark S&P/NZX 50 index, South Korea's Kospi and the FTSE Bursa Malaysia Kuala Lumpur Composite Index all closing down. Hong Kong, Shanghai and Taipei markets were closed for the festivities.

The losses yesterday came as no surprise, in line with the Dow futures, tipped to open down 20 points near 5pm.

On Monday, Wall Street posted its largest drop this year as investors' concerns persisted over Mr Trump's executive order.

Last Friday, he banned immigration from seven Muslim-majority countries, including legal residents and visa holders, and temporarily halted the entry of refugees. Yesterday, he sacked the US Acting Attorney-General Sally Yates, who refused to enforce the ban.

FURORE

Mr Michael Every, head of financial markets research for Asia-Pacific at RaboResearch, noted in a Jan 31 report that there are signs the immigration clampdown furore is escalating, and the markets finally reacted on Monday.

"The broad US dollar index, which has already been battered of late, is holding around the 100.4 level, however, while 10-year Treasuries are still around 2.49 per cent as before. All assets are waiting with baited breath to see how things develop from here, in the US and globally," Mr Every wrote.

Ms Pan Jingyi, market strategist at IG Asia, on Tuesday noted that the S&P 500 index slipped 0.6 per cent on Monday - the biggest one-day percentage drop since Dec 28.

She added: "For the local STI, a moderate decline could be the outlook for the day following the dip in US markets and a depressed Nikkei 225 this morning. Positive leads may feed in later in the week from China's manufacturing purchasing managers' index data, while Singapore's own first manufacturing reading will be due on Thursday..."

Back home, index movers DBS, OCBC and Singtel lost about eight points. Keppel Corp, CapitaLand and UOB were also in the red. Among the most active was GSS Energy's counter. The stock closed up 1.1 Singapore cents, with more than 44 million units changing hands.

Said Ms Margaret Yang, analyst at CMC Markets Singapore: "The STI rallied over 6.4 per cent in January, marking the best performing market in Asia.

"This rally has partially priced in favourable Q4 corporate earnings and higher crude oil prices this year. The sustainability of this sentiment will be tested in February, when two-thirds of the blue-chip companies' earnings will be announced."

Globally, there is upward pressure on real US growth in 2017, but Mr Dave Lafferty, chief market strategist at Natixis Global Asset Management, cautioned investors in the January report from being overly optimistic.

"Most of the benefits to any infrastructure programme (in the US) will occur after 2017.

"They may also be limited by fiscal pressure coming from Congress or provide only a short-term boost if not designed to improve long-term productivity. Lower personal tax rates should increase consumption but will also be constrained by deficit hawks.

"Lower corporate tax rates and discounted repatriation of foreign earnings should bolster capital expenditures, but these cuts may be partially offset by repealing other corporate deductions," he said.

This, as geopolitical risks loom even as a modest improvement in the global economy and reasonable (if unspectacular) returns for risk assets are expected, he said.

He added: "Investors would be wise to recognise that short-term volatility often overpowers improving fundamentals.

"This burgeoning uncertainty represents an opportunity for true long-term investors but is likely to cause heartache for the more risk-averse."

This article appears in The Business Times today. For full listings of SGX prices, go to http://btd.sg/BTmkts