Growth, trade woes weigh on STI

Singapore stocks closed broadly lower yesterday, as the final reading on gross domestic product (GDP) missed expectations, and growth outlook was lowered.

The latest flare-up in the China-US trade relationship also weighed on investors' minds.

The Straits Times Index (STI) closed at 3,183.26, down 22.20 points or 0.7 per cent.

IG market strategist Pan Jingyi noted: "The Singapore market had to contend with the double whammy of the year-on-year GDP miss and lowered growth outlook, which kept prices in the red.

"The first-quarter reading of GDP at 1.2 per cent, the lowest reading seen since 2009, had been a drag on local market sentiment."

Mr Eli Lee, Bank of Singapore's head of investment strategy, said in a client note: "Given that Huawei's access to US chips is essential to its viability as a firm, this represents further escalation and the opening up of a new dimension of the US-China trade conflict.

"Not only has trust between the two sides been severely eroded, a genuine threat to Huawei's survival would risk a sharp retaliation from China."

Among regional markets, China advanced 1.2 per cent, Australia gained 0.4 per cent and South Korea added 0.6 per cent. Elsewhere, Japan fell 0.2 per cent while Hong Kong closed 0.5 per cent lower.

In Singapore, trading volume clocked in at 1.21 billion securities or 96 per cent of the daily average in the first four months of 2019.

Total turnover came to $1.21 billion, 18 per cent over the January-to-April daily average.

Across the market, decliners outnumbered advancers 281 to 121. The benchmark index had 21 of its 30 components ending in the red.

Among them, Yangzijiang Shipbuilding was the bourse's most traded stock, closing three cents or 2.1 per cent lower at $1.44 with 32 million shares changing hands. "The shipbuilder fell as its stock went ex-dividend on Tuesday," a trader said.

Even though the US has limited the blow dealt to Huawei, albeit temporarily, by delaying the supply ban by 90 days for the Chinese firm's suppliers, tech counters in the local market saw sell-offs as investor sentiment continued to dip.

AEM Holdings, one of the firms selected by Huawei for testing and developing cabling links for the latter's 5G backhaul network and also a supplier to US semiconductor Intel, closed 3.5 cents or 3.6 per cent down at $0.93.

With local growth concerns and risks of further escalation in trade tensions, the market continues to take on a cautious stance.

Market watchers told The Business Times that investors and traders had exited positions in growth and trade sensitive cyclical stocks.

This included the local banks, which all ended in the red. DBS Group Holdings finished $0.15 or 0.6 per cent lower at $25.74, OCBC Bank dropped six cents or 0.5 per cent at $11.09, while United Overseas Bank fell $0.15 or 0.6 per cent to $24.83.

Instead, new positions were entered in defensive counters with a strong local presence like telcos and food and beverage players.

Singtel ended flat at $3.14 while StarHub added one cent or 0.7 per cent to close at $1.53.

Meanwhile, ThaiBev added 0.5 cent or 0.6 per cent to 78.5 cents and supermarket operator Sheng Siong closed unchanged at $1.06.

With equity markets continuing to remain volatile and difficulty in predicting how China will respond to the US, a remisier advised his clients to stay on the sidelines, as stock prices may head further south.

"Stocks that have recently become reasonably valued could yet face further corrections, and cheap stocks could become even cheaper," he remarked.

For full listings of SGX prices, go to https://www2.sgx.com