US Credit Woes Seen Weighing On Singapore

Source : TODAY, Monday, August 13, 2007

SINGAPORE share prices are expected to remain under pressure this week from the spillover impact of turmoil in the United States housing market sparked by loans to lowquality borrowers, analysts said.

Like other regional stock exchanges, the local market succumbed to a sell-down last Friday, despite news that its economic growth came in better than expected in the second quarter to June.

The Straits Times Index closed at 3,359.19 on Friday, down 76.86 points or 2.24 per cent from the previous week.

In the week ending Aug 10, average daily volume for four days totalled 2.44 billion shares worth $2.70 billion, compared with 3.38 billion shares valued at $3.23 billion last week. There was no trading last Thursday due to the National Day Holiday.

“I suspect we will continue to see the impact ripple through financial institutions around the world,” Mr Song Seng Wun, a regional economist at CIMB-GK in Singapore, said of the US fallout. “It is a bit early to tell whether this is contained or the beginning of something more serious as far as the credit markets are concerned.”

DMG and Partners senior dealing director Gabriel Yap expects market volatility to continue for a few more days before stabilising, if no more funds report any major fallout from exposure to the US sub-prime sector.

Stock markets worldwide plummeted last Friday, a day after France’s BNP Paribas suspended three funds open to the US subprime market, which involves lending to borrowers with poor credit histories. There are concerns the problem could spread into the larger economy and affect consumption and investments.

Fraser Securities research head Najeeb Jarhom said the strong domestic economy and corporate earnings growth prospects should cap the index’s downslide at 3,200. — AFP