Markets roiled again, but bottom-fishers are in action

Singapore

SINGAPORE stocks took another punch on Friday after US stocks fell into correction territory overnight with the Dow Jones and the S&P 500 off more than 10 per cent from their peaks.

Still the Straits Times Index (STI) recovered some ground to end the day just 38.66 points or 1.13 per cent lower at 3,377.24, after the Dow futures flashed signs of a positive reversal and bottom-fishers scooped up quality blue chips. But punters remained spooked by inflationary fears and the return of volatility to the late-stage bull market, which sent the STI down 152.13 points or 4.3 per cent for the week. Wall Street stocks rose in early trading Friday, bouncing back after the prior session's rout, as investors braced for more lurches in direction amid heightened volatility. About three minutes into trading, the Dow Jones Industrial Average was at 24,120.83, up 1.1 per cent.

On the Singapore bourse on Friday, losses were widespread, with losers outnumbering gainers 448 to 85 on Friday, as nervous traders watched the sell-off in China deepen. Hong Kong's Hang Seng lost 3.1 per cent; the Shanghai Composite slumped 4.05 per cent.

In part, the market is bracing for the consequences of the sprawling HNA Group's liquidity crunch, said Kelvin Tay, regional chief investment officer at UBS Wealth Management. But funds are also closing positions ahead of the Chinese New Year holiday next week. "On a year-to-date basis, China was the best-performing market, so there's some profit-taking. South-bound flows into Hong Kong will also be weak for the next week," he told The Business Times. Overall, a sanguine tone still dominates.

IG Asia market strategist Pan Jingyi told BT on Friday evening: "The longer-term view has not changed for me. In Singapore, the shock with respect to the US session was priced in at the start, but US futures are showing upside right now."

Luca Paolini, chief strategist at Pictet Asset Management in Hong Kong, urged investors not to get "sidetracked" by the market's newfound volatility. "While I think the bull market now has limited upside, the indications are that we are not (yet) close to a major market peak.

A significant widening of credit spreads and a decline in lead indicators is required to call the end of this and any bull market," he said. But market observers also warned that volatility would define the coming weeks as inflationary pressure, which could force central banks to bring the economic boom to a premature end, remains topmost on everyone's minds.

On Thursday, central banks signalled that they would not shirk from their missions to normalise interest rates. New York Fed President William Dudley called the US market drop "small potatoes" while the Bank of England hinted at earlier and larger rate hikes.

UBS's Mr Tay said: "The market will likely remain nervous over inflationary pressure until we get reassurance from US core inflation and non-farm payroll numbers in early March to see if inflationary pressure buildin up in US economy. if data is strong, mkt react."

Meanwhile, Friday's market dip was not entirely surprising, given the forced selling against those unable to top up their margin calls.

So even as Reits and growth stocks got hammered, buyers returned to lift certain counters off their intra-day lows.

DBS Group bounced 3 per cent from its intra-day low to close flat at S$26.71 after promising to raise dividends to S$1.20 a share from this year on.

Other counters that closed more than 2 per cent above their day's low were OCBC, Sembcorp Marine, Sembcorp Industries, Venture Corp, Singapore Post and Hutchison Port Holdings Trust.