Singapore shares close lower on US rate worries

THE Straits Times Index slipped 16.83 points to 3,023.65 on Thursday in quiet trading that saw 1.2 billion units worth S$948.6 million traded, a loss that came despite a slight firming in Hong Kong and China, as well as a modest rise in the Dow futures.

Traders said an impending US rate hike in December was the main factor after US Federal Reserve chair Janet Yellen said on Wednesday that the Fed expects to move forward with the first rate increase "in a timely fashion" as this is the "prudent thing to do".

Trading in the 30 STI components amounted to 217.3 million worth S$651.3 million, which in dollar terms was 69 per cent of the whole market's turnover. Excluding business done in the 30 STI members, volume was 983 million units worth S$297.3 million for an average of S$0.30, indicating most of the interest outside of the index was in penny stocks.

DBS, Singtel and OCBC led the fall. Macquarie Warrants in its daily newsletter said banks have been the STI's stalwarts for several years now and stability of their earnings has remained a theme in FY15. "But the group's shares have come off due to concerns over slowing top line growth and asset quality," said MW.

"This, in turn, has left the likes of UOB and OCBC trading below their past minus one standard deviation levels on price per book value (PBV)." It said MER analysts agree with the market's concerns to a degree, but see the declines as overdone.

"With reasonable forward earnings expectations, the highest dividend yield in Asia ex Japan, and lower than expected FX policy risk, MER thinks Singapore deserves a seat at the regional table," said MW. It has kept the banks as key index overweights and sees 7 per cent upside for the index.