STI falls amid banks' weakness, Trump woes and Spain attacks

POLITICAL posturing and the threat of war between the United States and North Korea were pushed aside this week, overshadowed by concerns over the local banks' exposure to the ailing oil and gas (O&G) sector, domestic political worries in the US surrounding escalating racial tensions and a terror attack in Barcelona. On Friday, the Straits Times Index (STI) fell for the fourth consecutive day, this time by 16.89 points to 3,251.99.

Over the course of the week, the index dropped 28 points or 0.9 per cent, the four-day losing streak somewhat cushioned by Monday's 29-point rise. That rise had been driven largely by the banks, and so it was that the subsequent weakness came from falls in DBS Group, UOB and OCBC Bank. Selling of the banks came after O&G firm Ezion suspended trading of its shares because of financial problems, prompting observers to say that banks' earnings were being reassessed by the market.

Macquarie Warrants (MW) in its daily newsletter on Friday referred to Ezion's suspension as well as losses reported by other O&G stocks such as Nam Cheong and Marco Polo Marine which, like Ezion, are in discussions with various stakeholders on the options going forward. "The 3-month Sibor (Singapore interbank offered rate) had merely a 5-basis-point increase in Q2 and 11-basis-point increase in July. As Singapore's benchmark rates have failed to keep abreast with those of the US, the currently flat interest margins may continue to cap earnings growth for a longer period of time," said MW.