RENEWED worries about the health of the global economy sent shudders through the region’s markets yesterday, with stock markets from Hong Kong to Japan closing 1 per cent to 4 per cent lower.
Although the markets were mostly off intraday lows, analysts expect volatility to continue to mark trading in the near term.
On Friday, United States shares sold off sharply after industrial equipment maker Caterpillar warned that the US economy would be “near to, or even in, recession”
next year.
Over the weekend, the Group of Seven richest nations added to the bleak mood when it enforced the International Monetary Fund’s cut in Japanese growth forecasts, reinforcing expectations that Japanese growth was likely to slow further.
In Singapore, the Straits Times Index (STI) shed 2.81 per cent to close at 3,642.6. volume of 2.53 billion shares traded, worth $2.61 billion, compared with 2.1 billion shares worth $2.31 billion on Friday. Losers overwhelmed gainers 795 to 173.
Among losers were banks. United Overseas Bank and DBS Group Holdings shed 80 cents and 70 cents to $21.30 and $20.70 respectively. Oversea-Chinese Banking Corp lost 1.7 per cent to $8.85.
Uni-Asia Finance Corp dropped nearly 21 per cent to $1.26 after the Singapore Exchange said it was investigating allegations of manipulation of the shares. On Friday, 33 retail investors demanded an explanation from some brokerages which had imposed trading curbs on the stock, triggering price falls and margin calls on investments.
Said Mr Najeeb Jarhom, senior vicepresident of AmFraser Securities: “We have re-entered the stage of instability which we went through in August, but it’s unlikely
that we’ll see the same scale of fall. That time, the index lost about 20 per cent from 3,688 to 2,962. Strong support should be between 3,500 and 3,600. The old high of 3,688 should be the new, minor resistance.”
With the US dollar at record lows against the euro and crude oil prices heading towards the US$100-a-barrel level, “there will be many anxious people debating whether another buying opportunity has presented itself this week or should they cash in their chips because global economic health is finally being threatened by the sharply higher oil prices — crude oil prices are now finally at levels where in
real-term (adjusted for inflation) they induced the previous global recession”, said
CIMB-GK Research.
For the year to date, the STI is still up some 26 per cent, CIMB noted.
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