Blue chips' sell-off sends STI down

Local shares got the shakes again yesterday after a few days of respite, with blue chips leading the market into negative territory.

The sell-off sent the Straits Times Index (STI) down 34.5 points or 1.17 per cent to 2,921.4.

The STI had recovered to 2,955.9 at Friday's close, after a sharp fall to 2,843.39 on Aug 24's close, as analysts and investors thought steep declines in markets around the world might cause the United States Federal Reserve to defer increasing interest rates.

Their belief was also bolstered when William Dudley, the president of the New York branch of the Fed, said that "international developments" had made the case for a rate rise this month "less compelling".

However, they were put on edge by weekend comments by a Fed member that a rate rise might still happen in this month, despite the global market turmoil last week.

The uncertainty sent Singtel down six cents or 1.58 per cent to $3.74 while Keppel Corp fell 20 cents or 2.84 per cent to $6.84.

Banking counters took a hit as well: DBS slid 25 cents or 1.39 per cent to $17.76, OCBC fell 17 cents or 1.87 per cent to $8.93 and UOB declined 37 cents or 1.87 per cent to $19.38.

But commodities firms bucked the trend, spurred in part by the rise in oil prices over the past couple of days, said CMC Markets analyst Nicholas Teo.

Noble Group was the STI's top gainer, up 2.5 cents or 4.81 per cent to 54.5 cents, while oilfield services firm Ezra Holdings gained 0.8 cents or 6.56 per cent to 13 cents.

Ezion gained 1.5 cents or 2.13 per cent to 72 cents.

Noble's rise could have been triggered by the announcement by Olam on Friday that Mitsubishi was making an investment in Olam.

Olam's share price closed 8.4 per cent higher on Friday at $2.07 and closed unchanged yesterday.

Noble had hinted in the past that it could be working on a merger and acquisition deal, a prospect that may have whetted investor appetites yesterday after they saw the market reaction to Olam's announcment, said Mr Teo.

Elsewhere, Hong Kong rose 0.27 per cent yesterday, Japan fell 1.3 per cent and Shanghai declined 0.82 per cent.

Should US rates rise, emerging market stocks would likely decline, suggested an economics research paper by Natixis which studied market data of the last few years.

It said that equity indexes, notably in Indonesia and Turkey, tend to fall when US Treasury yields rise.

It also said that emerging market equities tend to weaken should US 10-year treasury rates rise and commodity prices fall.

jkoh@sph.com.sg

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