STI slides along with regional bourses

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Analysts attribute quieter trading to profit-taking after November's bullish run

THE sell-off in Wall Street put paid to any hopes of gains on the local bourse, with the key Straits Times Index logging its third straight session of losses.

Fundamentals have not changed and hence analysts attribute the down time in the market to profit taking activities after November's bullish run, which saw the index jump 1.8 per cent.

Yesterday, the market's key barometer lost 40.85 points or 1.2 per cent to finish at 3,397.21.

Most other Asian bourses also saw red, with Japan's Nikkei 225 losing nearly 2 per cent, Hong Kong's Hang Seng down 2.1 per cent and China's Shanghai Composite slipping 0.3 per cent. Malaysia's KLCI fell 0.4 per cent while Australia's ASX 200 lost 0.4 per cent.

US stocks fell overnight on Tuesday as volatility returned and a technology rebound lost steam while investors processed how a Republican US tax overhaul would impact corporate earnings.

"The lull period had certainly invited some repositioning though fundamentals remained little changed to trigger major shifts, setting our focus ahead to key events including Friday's labour market data in the US and next week's Fed update," said IG Market strategist Jingyi Pan in a note.

Meanwhile, upbeat projections on the global macro backdrop are pouring in for 2018.

BOA Merrill Lynch Global Research issued a bullish macro outlook for next year, predicting robust global economic growth, steady US expansion and solid stock returns that could peak in the first half of the year.

However, it warned of signs that the long bull market run is nearing the end of its leash and could trigger a mid-year pullback alongside potential for some of the best returns in the last gasps of the cycle.

"Our overall outlook for the year ahead is macro bullish, so much so that we're ultimately market bearish," said Mr Michael Hartnett, head of global investment strategy, BOA Merrill Lynch Global Research.

"Investors are chasing growth and high-yielding assets in a bull market that's been driven and enabled by central bank liquidity. We see an end to this Icarus trade and an aggressive downgrade of risk assets once profits peak, investor positioning becomes excessively enthusiastic and central banks start withdrawing liquidity as they scale back support," he added.

As for the local bourse's key index, Phillip Capital has kept its end-year target of 3,450 unchanged on the back of an uptrend in global macro indicators for the fourth quarter.

In terms of technicals, it expects the STI to face some immediate roadblock ahead at the 3,457 high - a resistance area that was a pivotal point back in May 2013 and February 2015 where the STI experienced a correction of 11 per cent and 2.9 per cent respectively.

Banks led yesterday's losses, with DBS Bank down 56 Singapore cents or 2.3 per cent at $24.24. United Overseas Bank fell 52 Singapore cents or nearly 2 per cent to $25.80 while OCBC Bank slipped 38 Singapore cents or 3 per cent to $12.13.

Ms Margaret Yang Yan of CMC Markets cautioned that the dividend yield of the three banks are "stretched" to their lowest level in nearly a decade due to the recent rally, which should serve as a warning that the current valuation is high and may not be able to sustain.

Cosco Shipping International was one of the most active with 27 million shares worth $13 million done. The counter closed unchanged at 48.5 Singapore cents.

Alliance Mineral Assets rose one Singapore cent or 3 per cent to 33.5 Singapore cents. The Australian miner said on Tuesday night that some 40.03 million Alliance Mineral shares belonging to substantial shareholder Living Waters Mining Australia were seized. The writ of seizure and sale was issued by Singapore's High Court.

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