Skip to main content

Advertisement

Advertisement

Asian markets plunge as rates rise, STI in red for year

SINGAPORE — Asian stock markets plummeted yesterday, extending recent losses as foreign funds continued to flee the region, with the overnight surge in benchmark bond yields leaving investors on edge while Singapore shares sank into the red for this year.

Investors monitor stock market prices in Kuala Lumpur August 16, 2013. Photo: Reuters

Investors monitor stock market prices in Kuala Lumpur August 16, 2013. Photo: Reuters

SINGAPORE — Asian stock markets plummeted yesterday, extending recent losses as foreign funds continued to flee the region, with the overnight surge in benchmark bond yields leaving investors on edge while Singapore shares sank into the red for this year.

Investors dumped shares a day before today’s release of minutes of the most recent United States Federal Reserve policy meeting, which would likely offer fresh hints on when the central bank will start winding down its US$85 billion (S$108.45 billion)-a-month bond purchase programme.

Markets have been nervous about the cutback in monetary stimulus since Fed Chairman Ben Bernanke hinted at it late in May.

The uncertainty had driven up borrowing costs in recent weeks, with the upward pressure causing the yield on the benchmark 10-year US Treasury to hit 2.90 per cent overnight, the highest since July 2011. The 30-year US Treasury yield rose to 3.90 per cent, the highest since August 2011. Singapore’s Straits Times Index fell 1.4 per cent to close at 3,128.75, leaving it down 1.2 per cent for the year to date.

Mr Stephen Jen, co-founder of hedge fund SLJ Macro Partners, said: “The eye of the storm is directly above emerging markets now, two years after it hovered over Europe and four years after it hit the US. This could be serious for Asia.”

And if the flight of foreign funds from Asian emerging markets accelerates, the Singapore market probably will not be spared, said Ms Carmen Lee, Head of OCBC Investment Research, although she added buyers would likely emerge at lower levels to limit losses.

“If you have an Asian portfolio, then the markets are tied together as one whole basket to some extent,” she said. “But, having said that, if funds get pulled out of Asia, which may have some knock-on effect in Singapore, then value and fundamentals will be the deciding factor. That means that if the STI goes down much further, then value investors will come back in to look at the market,” she added.

Mr Desmond Chua, analyst at CMC Markets, said that while the impact of the flight from Asian emerging markets might be felt in Singapore, it was not time for investors here to press the panic button. “We will definitely see some spillover effect, but the Singapore market is generally more resilient. There will be some form of a sell-down, but the market has come down to this level before and been okay.”

“The last support level for the STI a couple of months back was 3,120 points, and we bounced back up. Those levels could be tested the next couple of days if the sell-off continues, but I don’t see how we’ll be affected that badly,” he said.

Among the key Asian stock markets, Japan’s Nikkei-225 plummeted 2.6 per cent, Hong Kong’s Hang Seng Index shed 2.2 per cent, while China’s Shanghai Composite Index lost a more modest 0.6 per cent.

Emerging markets continued to be battered as the fears of the end of the cheap money era and the improved outlooks in advanced economies caused foreign investors to stampede out of these already-strained investments, reversing a flow of money into the region in favour of nascent recoveries in the US and Europe.

The Jakarta Composite Index fell sharply for the second day running, losing another 3.2 per cent after Monday’s 5.6 per cent rout, while India’s Mumbai Sensex shed 0.3 per cent to extend the 1.6 per cent decline in the previous day.

Indonesian shares have plunged nearly 20 per cent from the record close on May 20, while the rupiah yesterday fell 1.8 per cent to 10,685 per US dollar after reaching 10,728, the weakest since April 2009. Indian stocks have declined more than 10 per cent from this year’s high on July 23 on concerns that policymakers’ efforts to limit a record slump in the currency will hurt growth — the rupee fell to a record 64.12 per US dollar yesterday. AGENCIES, WITH ADDITIONAL REPORTING FROM DAVID BOTTOMLEY

Read more of the latest in

Advertisement

Advertisement

Stay in the know. Anytime. Anywhere.

Subscribe to get daily news updates, insights and must reads delivered straight to your inbox.

By clicking subscribe, I agree for my personal data to be used to send me TODAY newsletters, promotional offers and for research and analysis.