THE Straits Times Index drifted within a narrow band, spending most of Wednesday in the red and headed for a fifth consecutive fall before a firm opening in Europe helped it rebound to a net gain of 5.92 points at 2,774.25. Turnover, however, was a weak 1.08 billion units worth S$772 million and the broad market excluding warrants recorded 170 rises versus 193 falls, suggesting the index owed its bounce more to short-covering after four days of falls than any genuine buying.
The main factor weighing on prices and sentiment is the June 23 UK referendum on whether to stay in the European Union. The general consensus is that if Britons vote to leave the European Union there will be a spike in volatility in currency and stock markets. This consensus was formed after recent opinion polls suggested that the "leave" camp had a slight lead over the "stay" supporters.
Wednesday's bounce in the STI came in tandem with gains in Hong Kong and China that came despite news that MSCI will delay including China A-shares in the MSCI Emerging Markets Index (MSCI EM), citing continued investor concerns over quota allocation, capital mobility, trading suspension and non-competitive clauses.
In response to the news, Morgan Stanley said it did not expect any negative impact to be significant or lasting as the pending MSCI decision had not been a noticeable driver of the A-share market in recent months.
Trading was overall a drab affair, the actives list comprising mainly low-priced speculatives churned by proprietary desk traders and dealers trading in their own accounts. Top of the list were familiar names such as LionGold, Annica and Ezra.