DBS stock falls $0.15 after 52-week high earlier this month
STI closes lower after getting dragged down by selling of DBS and OCBC shares
Selling of DBS Group and OCBC Bank shares yesterday meant the Straits Times Index (STI) finished the session 1.77 points lower at 2,911.31. Turnover, which dipped below one billion units on Monday for the first time in about a month, amounted to 1.6 billion units worth $977 million. And, excluding warrants, there were 175 rises versus 270 falls.
Two factors were said to be responsible for the drop in volume - the start of the holidays, and a flight of capital out of emerging markets into the US dollar because of higher interest-rate expectations.
DBS, which closed at $15.13 on the eve of the US elections on Nov 7, closed at a 52-week high of $18.32 on Dec 7 - a gain of $3.19 or 21 per cent in four weeks. Yesterday, it fell $0.15 to $17.55 on volume of 5.9 million.
In the second line, Singapore Exchange despatched two queries - to oil and gas trading firm New Silkroutes Group after its shares plunged $0.085 or 11 per cent to $0.685 on volume of 2.15 million, and to cleanroom specialists Acromec after its shares dived $0.10 or 17.4 per cent to $0.475 with 5.8 million traded. Acromec replied in the late afternoon that it did not know of reasons for the fall.
CMC Markets in its Singapore commentary at the start of trading yesterday noted that the Hang Seng Index had tumbled over 1,200 points or 5 per cent over the last two weeks.
"The selling was accompanied by emerging market outflow as the US dollar surged to a decade's high. The fast-depreciating of (the yuan) also urged outflow from the China market, further weighing on Hong Kong equities," it said.
"Technically, the Hang Seng Index has fallen to a key support level at around 21,800 points, which is also the 61.8 per cent Fibonacci extension level. Breaking below this level will open the floor to further downside, pointing to 21,360."
It added that for Singapore, the shrinking volume indicates a relatively quiet calendar towards the end of the year. It suggested that "the Straits Times Index may range between 2,900-2,960 points, unless we see a 'window-dressing' rally next week".
ABN Amro, in its Global Daily Insight, said it expects five themes for next year: more growth, tighter financial conditions, another year of political risks, the return of inflation, and monetary policy divergence.
"Trumpflation has added fuel to the bond sell-off that was already underway before the US elections. Since the US elections, US 10-year Treasury yields are up by more than 70bp (basis points). The surge in yields may exaggerate the tightening in financial conditions."
"Inflation expectations have risen significantly, meaning that rise in real rates is somewhat less, while equity markets have also done well.
"On the other hand, the rise in US Treasury yields has also tightened financial conditions in other countries, not least emerging markets via portfolio outflows and the dollar has strengthened," it said.
Westpac, in its 2017 Outlook, noted that for the US economy, business investment has been a key area of weakness for most of the past two years.
"In part this is the result of the investment boom in the oil and gas sector of years past, which has been brought to an abrupt end by weaker prices and more efficient practises," it said.
"However, the weakness in investment has been much broader than one sector or type of investment. Given the continued rally in the US dollar and the uncertainty that remains over potential changes to tariffs and taxation, it seems highly unlikely that this weak trend will revert in the near term.
"Indeed, should the US dollar continue higher as we expect, a further deterioration is a risk - albeit an unlikely one. Given the above, we continue to believe that two rate hikes in 2017 is more likely than three..."
This article appears in The Business Times today. For full listings of SGX prices, go to http://btd.sg/BTmkts