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Singapore shares close lower as Deutsche Bank's problems ensure weak end to Q3

EIGHT years after the US sub-prime debacle, its effects are still being felt, this time in the form of worries that Germany's Deutsche Bank could, because of its role in selling junk mortgages that led to 2008's crisis, go belly-up and trigger a repeat meltdown of the financial system.

On Friday, news that hedge funds have reduced their exposure to Deutsche brought pressure to bear on all regional markets and cancelled out gains earlier in the week that came from an oil price surge and the first US presidential debate which appeared to have been won by the Democratic candidate Hillary Clinton.

The hedge fund withdrawal came after a report earlier last month that the US Justice Department has ordered Deutsche to pay US$14 billion in fines for the latter's role in the sub-prime fiasco. Although that fine will very likely be reduced after appeals and negotiations are concluded, the development sent Deutsche's shares crashing.

Concerns that if Deutsche goes under, then there could be another financial crisis on hand, meant Western markets suffered heavy selling on Thursday. This reverberated here on Friday, dragging the Straits Times Index almost 30 points down at one stage, before quarter-ending window-dressing and short covering cut this loss to 16.24 points at 2,869.47.

For the week, the index gained 14 points or 0.5 per cent; for the quarter the rise was one per cent.