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STI reverses early-session gains to end 1.2% lower on Wednesday

SINGAPORE'S Straits Times Index (STI) looked set for a rebound of its own, just like Wall Street did so on Tuesday, but concerns over the spread of Covid-19 overshadowed policy support to combat the economic fallout from the outbreak.

The STI opened more than 1 per cent higher and built on those gains, even as US futures were pointing to a weaker open in New York. However, the STI reversed course as European markets opened, eventually closing 28.91 points or 1.2 per cent lower at 2,425.62. Twenty four of the STI's 30 components ended the day in the red.

Elsewhere in the Asia-Pacific, equity benchmarks in Australia, China, Hong Kong, Japan Malaysia, South Korea and Taiwan were markedly lower.

Traditional safe-haven gold continued to fall as investors continued to sell the yellow metal to cover margin losses in equities.

Overnight, news reports said the White House was seeking approval for a US$1.2 trillion package that will include direct payments to households in two weeks. Proposals were also made for US$300 billion in loans for small businesses and income tax deferrals.

The US Federal Reserve has also launched a US$300 billion programme to purchase asset-backed three-month duration commercial papers to  alleviate the credit crunch facing US businesses, along with other tools in hope of stabilising battered markets.

"However, these actions might not spark a sustainable rally in the stock markets. For that to happen, the  US government may have to articulate and deliver meaningful fiscal stimulus packages that ideally should underwrite credit," said Kelvin Tay, regional chief investment officer at UBS Global Wealth Management.

The big gainer among STI counters was Singapore Exchange, which closed S$0.17 or 2.1 per cent up at S$8.35. Shares in the bourse operator have been on the up since last week, after reporting strong trading volumes in February amid volatile market conditions. Daily securities trading volumes for each trading day this month have been consistently over its 2019 average.

Singapore's banks continued to trade lower. DBS dipped S$0.10 or 0.6 per cent to S$17.90; OCBC Bank closed S$0.12 or 1.4 per cent lower at S$8.49; and United Overseas Bank ended the day at S$19.20, down S$0.19 or 1 per cent.

Among other financials, Great Eastern Holdings fell S$0.43 or 2.4 per cent to S$17.77. Citi Research analysts downgraded the insurer to "hold" and slashed its price target to S$19.50 from S$27 to take into account an estimated net profit decline of 32 per cent for FY2020.

The decline in net profit projections assumes the impact of weak investment performance on earnings for both Great Eastern’s insurance and shareholders’ funds. Lower earnings for Great Eastern are likely to affect parent OCBC Bank, Citi noted. Great Eastern contributes to around 20 per cent of OCBC's profits.

Real estate investment trusts (Reits) continued to be sold off by investors with the iEdge S-Reit Index, down 25.06 points or 2.3 per cent to 1,062.82.

"The mix of fund redemptions and unwinding of leveraged positions have resulted in the indiscriminate selling of Singapore Reits," said DBS Group Research said in a report on Wednesday.

DBS analysts recommend that investors be selective in accumulating Reits following over-selling of the sector by investors. This includes the STI's Ascendas Reit and CapitaLand Mall Trust.

Trading volume in Singapore was 2.65 billion securities; total turnover was S$2.33 billion. Across the broader market, decliners trumped advancers 384 to 150.