The dreadful start to the share trading year has likely set the tone for much of 2016, analysts said yesterday. Local shares took a hammering, with the Straits Times Index (STI) falling 1.62 per cent to 2,835.97 points on the back of concerns over the health of the Chinese economy.
Analysts told The Straits Times that worry surrounding the world's second-largest economy in 2015 will likely continue into the new year.
"Sentiment has been poor all through the fourth quarter and that worry continues to be the big overhang on the market. If you look at the underlying pressure on the STI component stocks, it doesn't look like it will go away in a while," said CIMB Private Banking director Song Seng Wun.
China is the key factor setting the mood of investors across the region these days. Poor manufacturing data sent its blue-chip CSI 300 Index diving 7 per cent yesterday, triggering a new circuit-breaker mechanism that suspended trading for the day.
"The Chinese are rebalancing their economy away from heavy industry, and heavy industry is manufacturing, right? And they are rebalancing towards consumption and services. This is actually evidence that what they are doing is working," said Mr Bryan Goh, chief investment officer of merchant bank Bordier & Cie Singapore.
ANZ economist Ng Weiwen expects China's manufacturing sector to remain weak as the country presses on with economic reforms. This in turn will affect a small open economy like Singapore more than countries with large domestic markets.
Tensions in the Middle East following the severance of diplomatic ties between Saudi Arabia and Iran also weighed on investor confidence, said Mr Jimmy Ho, president of the Society of Remisiers. "I don't see a lot of good news ahead; there will probably be a continuation of this market silence, people staying away until things are seen to be more stable," he said.
NRA Capital research director Liu Jinshu said: "The STI may continue to fall in the beginning of the year before bargain hunting comes in... We may see some support coming in below 2,750 points."
Mr Song said the declines in regional markets could offer opportunity for "large institutions with deep pockets" to snap up good bargains, should the sell-off continue.
Even without the sell-off in China, Mr Liu said traders had been betting on a "negative open" yesterday, as Asian markets catch up with last week's declines in the United States.
Analysts said more stable oil prices, the lifting of property cooling measures here and new stimulus measures by the Chinese government could help boost market sentiments, if implemented.
Additional reporting by Jeremy Koh
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