Business

US probe jitters weigh on S’pore shares

Straits Times Index closes lower by 11.07 points, turnover low at 1.5 billion worth $810 million

The volatility set off by United States President Donald Trump is back and this time Asian markets seem to be torn as to how worried they should be.

Following the tumble on Wall Street over the weekend after Mr Trump's former top aide, Michael Flynn, pleaded guilty to lying to the Federal Bureau of Investigation, the indices bounced back soon after the massive tax cut went through the Senate.

But this recovery failed to spill over to the Straits Times Index (STI) yesterday, even as the Dow futures was up 200 points in the afternoon.

Perhaps an indication that the markets needed time to digest the unfolding events, the STI closed lower by 11.07 points, or 0.32 per cent, at 3,438.47.

Turnover for the day was thin, coming in at 1.5 billion worth $810 million.

Excluding warrants, losses were broad-based with the advance-decline score 175 to 260.

CMC Markets' Margaret Yang pointed out in her morning note that the US tax reform will bring down the corporate tax rate to 20 per cent in 2019 from the current 35 per cent. And unlike the individual provisions, the change would be permanent.

"Although a generous tax cut would potentially result in as much as US$1.3 trillion fiscal deficits in the years to come, markets tend to enjoy the near term rally without bothering about what is going to happen a decade from now," she said.

As much as the US tax cut brought some cheer to the markets, there are worries over how much overseas capital will flow back to the US in investors' chase for yield in the form of investments and repatriations.

This, as the US policy tightening can potentially suck liquidity from emerging markets and derail global growth.

Back home, the STI was dragged by counters of financial and industrial stocks such as UOB, OCBC, Jardine group of companies and Singapore Airlines, which contributed a combined loss of 19 points, even as shares of Singtel, Genting Singapore, City Developments and DBS helped recover some lost ground.

Index heavyweight Singtel's counter finished at $3.75, up one cent after the telco and bike-sharing firm Mobike agreed to collaborate in areas such as mobile payments and the use of Internet of Things technology.

Among the actives list was shares of No Signboard, which closed half a cent up to $0.30 on a volume of 16.4 million. The company made its trading debut at the end of last month.

Offshore and marine stocks were in play yesterday, with shares of Cosco Shipping International losing 2.5 Singapore cents to end at $0.495, while that of Yangzijiang Shipbuilding slid two Singapore cents to $1.52.

Oil prices had fallen yesterday after US shale drillers added more rigs last week.

Still, prices were near the highest since mid-2015, supported by an extension of output cuts agreed by Opec and other producers.

UOB said in a note that in the coming week, all eyes will be glued to US politics as Democratic and Republican congressional leaders race against time to approve a federal spending plan to keep the government open and prevent any partial shutdown after current funding expires on Friday.

Trade data out of China, also on Friday, may provide some respite to the markets as early indicators are mildly positive.

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