Oil-related stocks take big hits on Monday, STI down 6%

SINGAPORE equities faced strong sell-offs on Monday as fears continue to escalate over Covid-19 but the local market's oil-related stocks were the most affected after sharp falls in oil prices.

With the Organization of the Petroleum Exporting Countries (Opec) and Russia failing to agree to an output cut amid the Covid-19 outbreak, a price war ensued with Saudi Arabia subscribing to its largest price cuts in two decades.

Crude benchmarks the West Texas Intermediate and Brent were down by as much as 31.5 per cent during the Asian session. Their deepest slides since 1991 set the stage for a dismal session for oil-related counters in the local market.

Keppel Corp slumped S$0.60 or 9.7 per cent to S$5.62, its lowest since late November 2016.

Fellow rig builder Sembcorp Industries shed S$0.16 or 9 per cent to S$1.61 while its unit Sembcorp Marine plunged 11.5 Singapore cents or 11.4 per cent to 89.5 Singapore cents. Meanwhile, jet fuel trader China Aviation Oil dropped S$0.10 or 9.3 per cent to S$0.98.

Among upstream oil and gas counters, Rex International lost 5.1 Singapore cents or 28.8 per cent to 12.6 Singapore cents with 130.6 million shares changing hands, the most on the Singapore bourse.

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GSS Energy skidded 1.5 Singapore cents or 20.3 per cent to 5.9 Singapore cents, while AusGroup fell S$0.01 or 27.8 per cent to 2.6 Singapore cents.     

The combination of the possibility of a Covid-19 epidemic and the shock in oil markets saw the Straits Times Index (STI) closing at its worst level since June 2016.

The blue-chip index lost 178.61 points or 6 per cent to 2,782.37, with all 30 of its components ending in the red in a session that one trader observed as "rife with indiscriminate selling".

AxiCorp chief market strategist Stephen Innes noted investors dove "into safe havens on accelerating Covid-19 cases in Europe, and as Saudi Arabia triggers a price war for oil, adding another level of unwanted panic to a market already thick with fear".

Singapore banks continued to extend their 52-week lows. DBS shares fell S$1.85 or 8 per cent to S$21.15; OCBC Bank lost S$0.69 or 6.8 per cent to S$9.52 while United Overseas Bank closed at S$21.50, down S$1.70 or 7.3 per cent.

Citi Research downgraded the trio to "sell" on expectations that short-term Fed interest rates are likely to hit and stay at zero for much of the rest of 2020. Citi added that the banks might not defend their dividend levels.

Real estate investment trusts (Reits) - last week's outperformers - also faced sell-offs. Among them, Ascendas Reit fell S$0.12 or 3.6 per cent to S$3.26 and CapitaLand Commercial Trust lost S$0.06 or 3 per cent to S$1.95.  

Trading volume in Singapore was 2.19 billion securities while total turnover came to S$2.64 billion. Across the broader market, decliners trumped advancers 525 to 84.

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

Sell-offs could continue in the coming days. 

"The market continues to be fear- and headline-driven, and it is difficult to imagine a durable and broad-based recovery in risk sentiments soon," said Mizuho Bank's head of economics and strategy for the Asia and Oceania treasury, Vishnu Varathan.