Local stocks slide on global growth fears

SINGAPORE stocks slid again on Tuesday, after the International Monetary Fund (IMF) sounded yet another warning about weakening global growth as a result of trade tariffs and financial market volatility.

Ahead of the World Economic Forum in Davos, the IMF also cut global growth forecasts, just three months since it forecast a downturn last October. The agency predicted the global economy will grow at 3.5 per cent in 2019, down from 3.7 per cent. In 2020, the global economy will grow at 3.6 per cent, instead of 3.7 per cent, according to the IMF.

In a morning note, OCBC Treasury Research said the latest cut from the IMF "is just a confirmation of existing concerns of a slower 2019".

On the sidelines of Davos, Singapore Finance Minister Heng Swee Keat also cautioned that a "very negative" outcome for the global economy could be likely if the US and China fail to come to an agreement on trade.

The news weighed on investor sentiment, clipping gains in most Asian markets. Key indices in China and Hong Kong posted some of the biggest losses.

Singapore stocks fared no better. The Straits Times Index began the day underwater and sank further in afternoon trade, before declining 0.86 per cent or 27.85 points to 3,192.71 at the closing bell. Losers outnumbered gainers 225 to 148 after 1.57 billion shares worth S$786.6 million changed hands.

"The Singapore market has already enjoyed an almost 5 per cent rise in 3 weeks. Some sideways movement is expected, especially with US equity futures pointing to some downside when it reopens," said Paul Chew, head of research at Phillip Securities.

Drags on the index came from manufacturing, transport, storage and communications sectors.

M1 shares closed 0.97 per cent lower at S$2.05 on Tuesday, after Keppel Corp and Singapore Press Holdings' joint venture company, Konnectivity, announced that there will be no increase in its offer price of S$2.06 per M1 share they do not already own. The closing date of their offer was also extended by at least two weeks.

Singtel's counter slid 0.66 per cent to S$3.02, while fellow telco Starhub slumped by 1.11 per cent to S$1.78. In contrast, Netlink NBN Trust ended the day on higher ground, up 0.65 per cent to S$0.775.

Another exception was ComfortDelGro, which put on 0.46 per cent to S$2.19. In a Tuesday note, KGI Securities noted that institutional investors have been accumulating the stock at S$2.10-2.30 levels, with JP Morgan's Asean Equity fund the latest to add a significant stake to its portfolio.

The fund added 2.37 million shares valued at S$3.7 million last December. Other funds which have bought into ComfortDelGro include Capital Research Management Company, a unit of Capital Group, which bought 44 million shares last quarter, observed KGI.

The index was also hurt by declines in financial counters. DBS Bank pared 1.84 per cent to S$24.55, while United Overseas Bank gave up 1.55 per cent to S$26.02. OCBC Bank posted the steepest decline, down 1.96 per cent to S$11.50.

Reits, which analysts have looked to as defensive plays in recent, volatile times, were a mixed bag. Soilbuild Reit gained 2.48 per cent after posting higher fourth quarter earnings on Monday.

However, Mapletree Logistics Trust, which also posted higher earnings, closed flat. OCBC analysts foresee more upside to come for the Trust.

With a number of Singapore Reits expected to release results this week, this may be the time to see if they can be expected to withstand this year's headwinds. CapitaLand Mall Trust, Mapletree Commercial Trust and Suntec Reit take to the stage on Wednesday.

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