Business

Recession fears spook Asia markets

STI falls 2 per cent at open but claws back early losses to finish at 3,126.09, down 0.7%

Investment sentiment continues to seesaw since US President Donald Trump declared tariffs on remaining Chinese imports.

But yesterday, investors in Asia appeared mostly concerned over global recession fears, thanks to a brief US yield curve inversion of the US 10-year and two-year treasury yield curve.

Regional indexes opened sharply lower, with Singapore's Straits Times Index (STI) recording a 2 per cent drop at the open. But the STI clawed back early losses to finish at 3,126.09, down 21.51 points or 0.7 per cent.

Australia, Japan and Malaysia also closed lower. China and Hong Kong finished higher. The latter, mired in protests for the past 10 weeks, staged a surprising performance on bargain hunting by Chinese investors. South Korea was closed.

CMC Markets analyst Margaret Yang said sentiment turned "extremely bearish" on the yield curve inversion, which "catalysed a new round of sell-offs as it was perceived to be a fairly reliable indicator for an upcoming economic recession".

But there might not be reason to panic just yet.

Mr Kelvin Tay, regional chief investment officer of UBS Global Wealth Management, noted: "Curve inversions may be a warning sign for recessions, but they're bad timing indicators for selling equities.

"Unlike trade conflicts, an inverted yield curve by itself has limited economic impact. Instead, its signal about the health of the economy is what matters, and it (the US economy) is not as negative as some investors fear."

Markets were also bothered by other indicators that the health of the global economy was heading southward with disappointing economic data releases from China, Germany and the euro zone.

The early morning sell-offs made for a heavy day of trading.

In Singapore, trading volume clocked in at 1.28 billion securities, 7 per cent more than the daily average in the first seven months of this year. Total turnover came to $1.44 billion, 36 per cent over the January-to-July daily average.

Across the market, decliners trumped advancers 258 to 156. The blue chip index had 14 of the 30 counters closing in the red.

Yangzijiang Shipbuilding plummeted 18 cents or 17.3 per cent to 86 cents, a 21/2 year low, after a week-long trading halt was lifted.

A total of 129.4 million shares changed hands, making it the most active counter on the Singapore bourse. Traders have said that the shipbuilder's stock is oversold but were not surprised that investors have yet to "bottom fish".

Financials were the other main laggards dragging the benchmark lower. DBS Group Holdings dropped 29 cents or 1.2 per cent to $24.70.

The other two local banks fared worse as they traded ex-dividend yesterday.

OCBC Bank fell 40 cents or 3.6 per cent to $10.70, while United Overseas Bank closed at $25.15, down 75 cents or 2.9 per cent.

According to Bloomberg reports, OCBC is said to be involved in a deal to take a controlling stake in PT Bank Permata, an Indonesian lender backed by Standard Chartered.

"If true, the proposed acquisition will be in line with the group's stated strategy to grow inorganically in the chosen geography and revenue vertical," Jefferies Singapore analyst Krishna Guha said.

Singtel shares stopped a two-day slide since releasing earnings, adding seven cents or 2.2 per cent to close at $3.23.

The telco's shares had fallen 4 per cent across the two sessions after it posted a 35 per cent fall in net profit for Q1.

With economic data from most major economies reaffirming that a global slowdown is on our hands, investors continued to pick up real estate investment trusts.

Among the main gainers were Mapletree North Asia Commercial Trust (up three cents or 2.4 per cent to $1.29) and CapitaLand Commercial Trust (up four cents or 2 per cent to $2.07).

For full listings of SGX prices, go to https://www2.sgx.com

Business