Business

STI slips again as central bankers meet

Investors cautious ahead of remarks by officials from US Fed and ECB, which may help shed light on QE tapering plans

Cautious investors with an eye on the US Federal Reserve and ongoing geopolitical uncertainties stayed on the sidelines and let Singapore shares fall to a fifth straight decline yesterday.

The Straits Times Index (STI) opened 1.39 points higher, but slipped steadily over the session to close at 3,246.99, lower by 0.15 per cent or 5 points. Losers outnumbered gainers 257 to 179, or 10 stocks down for every seven up.

It was a quiet start to the week, with only 1.2 billion shares worth $961.6 million changing hands. That represented about half of the average daily trading volume of 2.4 billion shares in the first seven months of the year, and 80 per cent of the average daily trading turnover of $1.2 billion.

"Very quiet day," one trader said. "It's still summer in the US and Europe, so usually around this time it's a bit slow."

There was a significant amount of money hanging out by the shorelines and gazing into the distance for some clarity on the weather ahead from the US central bank, whose key policymakers will be attending an annual meeting this week.

Fed chairman Janet Yellen and European Central Bank (ECB) president Mario Draghi are expected to speak at the symposium on Friday (US time).

"Market sentiment remains cautious," CMC Markets analyst Margaret Yang said. "Many traders are choosing to stay on the sidelines until the Fed and ECB paint a clearer picture of their policy outlook and quantitative easing tapering plans."

Best World International was a notable mover, gaining 2.1 per cent, or 2.5 Singapore cents, to close at $1.22 as a positive broker's report and insider buying helped the stock to pull out of a week-long slide.

Best World's stock had been hammered after Chinese authorities on Aug 14 announced a campaign to target illegal pyramid schemes.

Investors worried about the impact on Best World's plans to convert its retail operators in China to a direct selling model for which the company has already obtained a licence.

Announcements late Friday revealed that three directors had bought just under 0.1 per cent of the company's shares at an average price of about $1.17 per share on the open market on Thursday and Friday.

On Monday, Maybank Kim Eng reiterated its "buy" call and $1.88 target on the stock, calling the China news "minimal downside risk".

In a reply to Maybank Kim Eng's queries, the company said it will ask the World Federation of Direct Selling Association to seek a clarification from Chinese regulators that the crackdown is not aimed at licenced direct sellers.

Maybank Kim Eng said: "We spoke to management and it clarified that the event has no or minimal impact on its business as it is not a pyramid scheme. We trust management based on its consistent track record."

Among the index stocks, rig builders Keppel Corp and Sembcorp Marine remained under pressure in the wake of poor results and financial difficulties among smaller oil and gas names.

Keppel closed at $6.24, down 1.4 per cent or 9 Singapore cents, while SembMarine eased 0.3 per cent or half a cent for a $1.575 close.

Ms Yang said: "Right now, crude oil price is still hovering around US$50 per barrel, which makes many deep-sea drilling activities unprofitable at this level...

"Singapore banks have said oil prices have to head to as much as US$70 per barrel before offshore support vessel operators can make a decent margin. So it might take a longer time for the sector to make a turnaround, provided they can survive until then."

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