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Singapore shares close lower on oil slide, US rate hike worries

TO say it hasn't been a good start to 2016 might be an understatement, given the plunges global equities have suffered this past week. China has been blamed for the losses, perhaps a convenient scapegoat for overvaluation of risk assets rooted in the easy money policies pursued by major central banks for several years now, starting with the US Federal Reserve and adopted by the European Central Bank and the Bank of Japan.

THERE were no surprises as far as Monday's trading in the local stock market went, as prices fell in the wake of Friday's Wall Street selloff. Weak oil prices and this week's US Federal Open Market Committee meeting were cited as the main culprits, though persistently weak sentiment towards emerging Asia and the upcoming holiday season also played significant roles.

The Straits Times Index (STI) started the day on the back foot and eventually closed 19.59 points weaker at 2,815.04. It was the index's fifth consecutive loss. Excluding warrants there were only 110 rises versus 310 falls in the broad market, while turnover amounted to 979 million units worth S$916.3 million, of which S$642.4 million or 70 per cent was done in the 30 STI components.

The continuing plunge in oil prices meant big names such as Keppel Corp, SembCorp and SembCorp Marine (SMM) come under intense pressure in recent weeks, with the latter particularly vulnerable after a profit warning a fortnight ago. SMM ended S$0.065 or 3.7 per cent weaker at nearly a seven-year low of S$1.67 on volume of 4.2 million. Keppel in the meantime, slumped to a S$0.14 loss at S$6.22 on turnover of 5.2 million.

The US Fed is expected to raise interest rates this week. However, according to fund managers Brandywine Global, an affiliate of Legg Mason, the environment in the US is not favourable to a rate increase due to a strong US dollar, nominal GDP (gross domestic product) growth problem and a flattening of the US yield curve.