Singapore stocks fall 1% as Russia's invasion amplifies growth, inflation risks

SINGAPORE shares fell on a renewed bout of selling pressure as oil barrelled past a 7-year peak of US$110 a barrel amid the worsening Russia-Ukraine crisis, further amplifying the world's growth and inflation risks.

The Straits Times Index lost 34.23 points or 1.04 per cent to 3,244.40 as investors wrestled with uncertainty amid a heightening of geopolitical tensions. Major equity gauges across the region also closed in the red except for South Korea, Australia and Malaysia.

Asian markets took the cue from US indices, which plunged overnight as the war compounded growth concerns, which financial markets are already bracing for as central banks, chiefly the Federal Reserve, are expected to raise interest rates to tamp down inflation.

Exinity Group's chief market analyst Han Tan said: "The Ukraine crisis isn't just reverberating throughout global financial markets, but also likely forcing a rethink among major central banks in their battle against inflation. Before Russia invaded Ukraine, major economies were already having to contend with inflation reaching multi-decade highs; the Ukraine crisis has only poured more fuel onto the inflation fire.

"However, instead of proceeding with the conventional policy response of hiking interest rates, central banks now have to take into account the added risks stemming from Russia's military actions. The Ukraine crisis has ramped up the prospects of a policy mistake by central banks which now have to tread carefully between subduing inflation while remaining sensitive to fresh downside risks to the economy."

Set against this backdrop, Fed chair Jerome Powell's testimony on Capitol Hill this week will no doubt be closely scrutinised word for word.

Oil prices shot through the roof, ahead of a pivotal meeting by the oil cartel and snubbed the release of more barrels from the strategic reserves by the US and other major governments aimed at stabilising prices and averting a supply shock.

"There are two main channels through which an adverse energy price shock would impact the region - first, via a negative real income impact on growth, initially via private consumption, and second, with a lag, through trade, which then affects capital spending," said JPMorgan analyst Ong Sin Beng.

Turnover on the local bourse stood at 1.61 billion securities worth S$1.66 billion. Wednesday's losses were led by falls in banking trio DBS, UOB and OCBC, as well as Venture Corp.

Losers outpaced gainers with 250 counters down and 227 up.

ComfortDelGro slipped S$0.02 or 1.4 per cent to S$1.41. Describing the mainboard-listed transport operator as an "emerging sustainability play" on the back of its efforts to green its business, DBS Group Research maintained a "buy" on the counter with a lower sum-of-the-parts target price of S$1.95. The house deems the company a "major reopening beneficiary" as mobility gradually normalises.

Two oil and gas plays, RH Petrogas and Rex International, stood out in terms of the day's most actively traded counters, galvanised by crude oil's surge. RH Petrogas jumped S$0.065 or 31 per cent to S$0.275. It was the day's most active counter with 82 million shares traded. Rex finished at S$0.43, up S$0.02 or 4.9 per cent.