Business

STI loses steam as sell-off in US tech bites

Gains disappear as investors turn cautious after technology stocks on Wall Street tumbled overnight

It was another down day for the Singapore bourse as it echoed the same note across most other key Asian bourses on the back of a mixed showing in US stock indices and a lack of fresh leads.

The Straits Times Index had woken up bright and was up for much of the day but ended on a flat note, closing 0.41 points or 0.01 per cent lower at 3,438.06 yesterday, taking the year-to-date performance to a gain of 19.4 per cent.

"Given the historically lighter trading volumes in December, we can expect price swings to be exacerbated, thus creating buying opportunities for companies with solid fundamentals," said KGI Research.

Japan's Nikkei 225 fell 0.4 per cent, Hong Kong's Hang Seng was down 1 per cent while China's Shanghai Composite lost 0.2 per cent. South Korea's Kospi bucked the trend, ending 0.3 per cent higher.

Asian markets, which saw mixed returns at the start of the week despite the US "tax glow", seemed to have succumbed to the pressure from US technology stocks' sell-off.

US tech stocks came under heavy selling pressure overnight Monday, which Ms Margaret Yang, analyst at CMC Markets Singapore, attributed to investors rotating out from the valuation-rich sector to lock in profits amid complicated tax overhaul reconciliation in the US Congress.

She cautioned that in the long term, there may be rising risk of emerging market capital outflows as a result of rising US interest rates and favourable tax treatment for repatriated funds if the tax reform effort in the world's largest economy passes all roadblocks.

In addition, improvement in the US economy and tighter monetary policy will further strengthen the US dollar and reinforce emerging market capital outflows, which will be partially cushioned by improved macroeconomic conditions in Asian countries, said Ms Yang.

The combination of a reversal of quantitative easing, rate hikes and rising inflationary pressures in the US will be among the most significant factors for global financial markets next year and countries with lower rates, such as South Korea or Singapore, may be potentially vulnerable to currency depreciation despite strong macrofundamentals, according to Mr Michael Hasenstab, chief investment officer for Templeton Global Macro in a recent note.

On the home front, turnover in the local bourse stood at 1.7 billion shares worth $1.1 billion versus Monday's 1.5 billion shares worth $810 million.

Losers outpaced gainers with 286 counters down and 175 up. Losses were led by City Developments (CDL), which fell 36 Singapore cents or 2.9 per cent to $11.88 while CapitaLand slipped six Singapore cents or 1.7 per cent to $3.48.

KGI Research said it expects the tight supply-demand dynamic in Singapore's private residential market to continue to sustain property stocks.

Also, the improving labour market may likely strengthen demand for private homes, said the research house, adding that its favourite plays in the sector are GuocoLand and CDL.

Despite STI's overall anaemic performance, banking stocks managed to trudge higher, with DBS Group inching up 20 Singapore cents or 0.8 per cent to $24.80. OCBC closed 15 Singapore cents or 1.2 per cent up to $12.51. UOB advanced six Singapore cents or 0.2 per cent to $26.32.

In an industry note that analysed the three banks' digitalisation efforts to improve operational efficiencies, Jefferies Research said DBS leads the way, closely followed by OCBC, while it noted that UOB has increased its tech spend significantly.

Catalist-listed No Signboard Holdings was one of the most active counters with 48 million shares worth $15 million done. The stock fell 0.5 Singapore cents or 1.7 per cent to 29.5 Singapore cents versus its IPO price of 28 Singapore cents per share.

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