Singapore shares drop 0.5% on new trade war front, recession fears

IF Tuesday's disappointing US manufacturing data was a stab in the arm to investor sentiment, then Wednesday's approval of US tariffs on European imports and lacklustre US jobs data was the double dagger to the chest, with regional benchmark indices facing another bout of selling.

While the local benchmark was not excluded from the melee, it fared better than most. The Straits Times Index (STI) fell by as much as 0.9 per cent by the middle of Thursday's session before partially recovering to end at 3,087.97, a 15.48-point or 0.5 per cent drop.

Australia, Japan, Malaysia and South Korea were all lower. However, Hong Kong bucked the trend after developments on Thursday afternoon that indicated the territory's government was set to ban face masks at demonstrations. The Hang Seng added 67.62 points or 0.3 per cent to 26,110.31. Markets in China are closed from Oct 1-7 for the week-long 70th anniversary celebrations.

In Singapore, trading volume clocked in at 970.82 million securities, 81 per cent of the daily average in the first eight months of 2019. Total turnover came to S$841.46 million, 78 per cent of the January-to-August daily average.

Across the market, decliners outpaced advancers 192 to 179. Seventeen of the blue-chip index's 30 counters ended in the red.

With little change to the fundamental outlook for most locally listed entities, Thursday's kneejerk reaction presented opportunities for traders to enter positions on attractively-valued counters.

One such counter, Yangzijiang Shipbuilding, remained the STI's most active counter with 38.3 million shares traded. It closed up two Singapore cents or 2.1 per cent to S$0.96 after a 6 per cent slide on Wednesday.

"Today is a 'buy day', one to look at cash-rich stocks and undervalued companies," said PhilipCapital principal trading representative Marcus Toh.

Mr Toh advised clients to look into SIA Engineering (closed S$0.01 or 0.4 per cent higher at S$2.59), which is in a net cash position of close to S$600 million, and undervalued Hongkong Land (closed unchanged at US$5.50).

There were also opportunities to take positions in defensively positioned high-dividend plays.

"After two days of steep selling, investors can take the opportunity to buy on the dip but focus on dividend-paying defensive stocks in the local market. The dividend income helps to provide some downside cushion if the market dips further," UOB Kay Hian trading representative Brandon Leu told The Business Times.

These include Singtel (ended unchanged at S$3.13), ComfortDelGro (finished down S$0.02 or 0.8 per cent at S$2.39), ST Engineering (ended unchanged at S$3.81) and SATS (closed up S$0.01 or 0.2 per cent at S$4.83).

All eyes will now be on US non-manufacturing Purchasing Managers' Index (PMI) data for September, to be released during Thursday's US session.