STI closes at lowest since July 2009 on Monday after Fed emergency cut

Singapore's Straits Times Index (STI) closed at its lowest level in over a decade on Monday, after the US Federal Reserve's second off-cycle emergency rate cut in March and disappointing February economic data from China.

The STI's counters were mostly in the red at the opening bell, with the index falling 3 per cent. The blue-chip index trended downward as the session went on to close 138.23 points or 5.3 per cent lower at 2,495.77. All but one - Yangzijiang Shipbuilding - of the STI's 30 components ended the day in the red.

Monday's closing level was the STI's lowest since July 2009. At current levels, it is in bear territory, down 26.9 per cent from its 52-week high of 3,415.18, achieved on April 29 last year.  

Overnight, the Fed announced a 100 basis points (bps) cut to the Fed Funds Rate to 0-0.25 per cent, the lowest range since 2008's Global Financial Crisis (GFC). The central bank lowered its discount rate by 150 bps to 0.25 per cent to facilitate credit provision for businesses and households. In a return to quantitative easing, it has also pledged to buy US$700 billion in bonds.

The Bank of Japan and the Hong Kong Monetary Authority eased rates after the Fed's decision.

Monday's performance in Asia suggested these policy measures are not enough to calm markets spooked by the escalating fallout from the Covid-19 outbreak.

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Jeffrey Halley, Oanda's Asia-Pacific senior market analyst said: "The Fed rate cut, rather than calming markets, appears to have highlighted just how serious the international situation has become."

More fiscal measures are likely needed.

Vishnu Varathan, Mizuho Bank's head of economics and strategy for the Asia and Oceania treasury, noted that the Fed's measures were "highly encouraging, although by the Fed's own admission, monetary policy lacks the more intimate and targeted reach of fiscal policy". 

Among STI counters, the shares of the Singapore banks continued their run of losses. DBS dropped S$0.77 or 4.0 per cent to S$18.58, OCBC Bank finished S$0.37 or 4.1 per cent lower at S$8.70, and United Overseas Bank ended the day at S$19.45, falling S$0.69 or 3.4 per cent.

The lenders might be hovering at lows last seen in 2017, but retail investors have found value in buying them amid recent broad market selloffs.

According to Singapore Exchange (SGX) market data for last week, retail investors were the top net buyers of the three local banks, with retail flows of S$241.5 million into DBS shares, S$174.2 million in OCBC Bank and S$87.6 million for UOB.

Data from the bourse operator also showed that institutional investors were net sellers of Singapore-listed stocks a week ago, but they bought into real estate investment trusts (Reits) and some defensively positioned counters instead.

These have included SGX (down S$0.39 or 4.6 per cent to S$8.08), which saw increased market turnover in February on higher volatility and Singapore-focused supermarket operator Sheng Siong (down S$0.07 or 6.4 per cent to S$1.03).

Reits continued to face sell-offs with the iEdge S-Reit Index, which tracks all property trusts listed in Singapore, diving 129.07 points or 10.1 per cent to 1,152.10.

Trading volume in Singapore was 2.16 billion securities; total turnover was S$2.51 billion. Across the broader market, decliners trumped advancers 444 to 122.

Elsewhere in the Asia-Pacific, benchmarks in Australia, China, Hong Kong, Japan, Malaysia, South Korea and Taiwan registered heavy losses.