Business

STI’s fall gives chances to buy on dip

Index ends 0.5% down, faring better than most Asia-Pacific counterparts

If Tuesday's disappointing US manufacturing data was a stab in the chest to investor sentiment, then Wednesday's approval of US tariffs on European imports and lacklustre US jobs data was the twist of the knife that sent regional benchmark indices into another bout of selling.

While the local benchmark was not excluded, it fared better than most Asia-Pacific counterparts, helped by some bargain hunting.

By the middle of yesterday, the Straits Times Index (STI) had fallen by as much as 0.9 per cent but it recovered to end at 3,087.97, 15.48 points or 0.5 per cent down.

Australia, Japan, Malaysia and South Korea were all lower. However, Hong Kong bucked the trend after afternoon reports that its government was set to ban face masks at demonstrations.

The Hang Seng added 67.62 points or 0.3 per cent to 26,110.31.

Markets in China remained closed for the week. Consecutive days of subpar US economic data are indicative that the resilience of the US economy is being tested, and mounting recessionary fears are a concern with investors likely to take cues from yesterday's non-manufacturing data for further clues to US economic health.

Moreover, a new front in the trade war was opened with the World Trade Organisation (WTO) giving Washington the go ahead to impose tariffs on US$7.5 billion (S$10.3 billion) of European goods. "European Union retaliation to these tariffs was expected. But WTO's finding that Boeing also enjoyed 'illegal tax breaks and government research windfall' sets the stage for another WTO trading blow in a ruling that may favour EU next year," wrote Mizuho Bank head of economics and strategy for the Asia and Oceania treasury Vishnu Varathan.

AxiTrader Asia-Pacific market strategist Stephen Innes noted: "Asian markets are now left dealing with the damaging effect of trade wars on three fronts. With the global economic data continuing to deteriorate, this new trade war front will stoke the recessionary fears to no end."

In Singapore, trading volume clocked 970.82 million securities, 81 per cent of the daily average in the first eight months of 2019.

Total turnover came to $841.46 million, 78 per cent of the January-to-August daily average.

Across the market, decliners outpaced advancers 192 to 179.

Seventeen of the blue-chip index's 30 counters ended in the red.

With little change to the fundamental outlook for most locally listed entities, Thursday's knee-jerk reaction presented opportunities for traders to enter positions on attractively-valued counters.

One such counter, Yangzijiang Shipbuilding, remained STI's most active counter with 38.3 million shares traded.

It closed up two cents or 2.1 per cent to 96 cents after a 6 per cent slide on Wednesday. "It was a day to buy," remarked PhillipCapital principal trading representative Marcus Toh, referring to value seen in cash-rich stocks and undervalued companies.

Mr Toh advised clients to look into SIA Engineering (closed one cent or 0.4 per cent higher at $2.59), which is in a net cash position of close to $600 million, and undervalued Hongkong Land (closed unchanged at US$5.50).

There were also opportunities to take positions in defensively positioned high-dividend plays.

Speaking to The Business Times, UOB Kay Hian trading representative Brandon Leu said: "After two days of steep selling, investors can take the opportunity to buy on the dip but focus on dividend-paying defensive stocks in the local market. The dividend income helps to provide some downside cushion if the market dips further."

These include Singtel (ended unchanged at $3.13), ComfortDelGro (finished down two cents or 0.8 per cent at $2.39), ST Engineering (ended flat at $3.81) and SATS (closed up one cent or 0.2 per cent at $4.83).

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

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