Bank Stocks Fall On Fears Of Sub-Prime Woes Slowing Growth

Source : The Business Times, September 19, 2007

SINGAPORE'S banking stocks fell yesterday, led by DBS Group Holdings, on concern a credit crisis stemming from the losses on US sub-prime mortgages will slow global economic growth.

'Markets look precarious,' said James Johnstone, who manages about US$100 million at Alcor Investment Management in Singapore. 'I'm avoiding all financial stocks.'

Keppel Corp, the world's largest rig builder, advanced on speculation that crude oil topping US$81 a barrel will spur exploration demand. Neptune Orient Lines, which operates Singapore's largest container shipping line, rose for the first time in six days as investors judged its recent declines excessive.

The Straits Times Index added 1.44 points, or less than 0.1 per cent, to 3,477.75 at the close. The measure had its biggest decline in four weeks on Monday, falling 1.7 per cent. Of the benchmark's 48 stocks, 19 declined and 17 climbed, with 12 closing unchanged. The September futures contract slid 0.5 per cent.

DBS, South-east Asia's largest bank by assets, slid 10 cents, or 0.5 per cent, to $19.30. United Overseas Bank declined 30 cents, or 1.4 per cent, to $20.50.

Oversea-Chinese Banking Corp, the smallest of the three local lenders, slipped 10 cents, or 1.2 per cent, to $8.60.

A gauge of financial stocks was the biggest decliner among nine industry groups on the Singapore All Equities Index.

Bank of America Corp, the second- biggest US bank, said the sub-prime credit crisis will have a 'meaningful impact' on third-quarter results and E*Trade Financial Corp, the New York-based online brokerage, cut its 2007 profit forecast by at least 25 per cent because of bad home loans and said it will quit the wholesale mortgage business.

In the US on Monday, the Standard & Poor's 500 Index fell 0.5 per cent, the Dow Jones Industrial Average decreased 0.3 per cent, while the Nasdaq Composite Index dropped 0.8 per cent.

US sub-prime mortgages account for about one per cent of Singapore banks' capital base, Second Finance Minister Tharman Shanmugaratnam told Parliament yesterday. The three local banks hold a combined $2.3 billion of collateralised debt obligations, of which 28 per cent contain some US sub-prime loans, the Monetary Authority of Singapore said.

Keppel gained 20 cents, or 1.5 per cent, to $13.40. Labroy Marine, a smaller rig-builder, rose five cents, or 2.3 per cent, to $2.24. Singapore Petroleum Co, an oil explorer and refiner, climbed 25 cents, or 4.1 per cent, to $6.30, the biggest percentage gain on the benchmark.

Singapore's key stock index had its biggest drop in four weeks on Monday as crude's slide from a record on Sept 14 dragged down shares of rig-builders.

'The most intuitive plays, on high crude prices, are oil and gas companies,' said Terence Wong, chief investment analyst at SIAS Research Pte in Singapore.

Crude oil rose above US$81 a barrel for the first time in after-hours electronic trading on the New York Mercantile Exchange. Oil for October delivery was recently at US$80.81.

Neptune Orient Lines climbed 10 cents, or 2.1 per cent, to $4.92, halting a 21 per cent drop over six days. It was the worst performer during that period among the 48 stocks that make up the Straits Times Index.

Chemoil Energy, a supplier of marine fuels, slumped 17 US cents, or 25 per cent, to 50.5 US cents, its biggest drop since it first sold shares in December 2006. The company incurred hedging losses on its fuel oil inventory, it said in a statement on Monday. -- Bloomberg