Oil supply uncertainties drive STI down

Asian markets closed mixed yesterday, as investors awaited clarity on whether the weekend attack on Saudi oil facilities would significantly disrupt global oil supplies.

Key indices in Australia, New Zealand and Japan ended higher, while those in China and Hong Kong closed with losses. South Korea closed flat.

Ms Esty Dwek, head of global market strategy, dynamic solutions at Natixis Investment Managers, said the oil price spike was not a surprise following the drone strike on Saturday, which impacted about 5 per cent of global supply.

"The question is how long it takes for the supply to get back online," she said, noting that it could be a matter of days.

"However, the risk premium of geopolitical risk, which has been basically ignored by markets in favour of growth worries in recent months, is likely to be priced in going forward," Ms Dwek added.

"So while we've already seen a retreat in prices, they will probably not come all the way back down, pricing in for some risk of further geopolitical tensions or disruptions."

In Singapore, the Straits Times Index lost 0.65 per cent or 20.93 points to close at 3,183. About 1.02 billion securities worth $838.33 million changed hands, and losers outnumbered gainers 224 to 154, or about three securities down for every two up.

Riding the higher oil prices was oilfield services firm Rex International, which gained 6.9 per cent or 0.6 cent to $0.093 on a volume of 88.44 million shares.

It was followed by TEE International, whose shares added 0.7 cent or 20 per cent to $0.042 with 67.8 million shares traded.

The company said on Monday night that its controlling shareholder Phua Chian Kin will be selling 150 million shares in the company, or a 23 per cent stake, for $9 million in cash.

Mr Phua has been in the spotlight for allegedly instructing unauthorised transactions totalling $6.55 million made by TEE International subsidiaries to related parties.

Yangzijiang Shipbuilding remained the most heavily traded STI counter, a position that it has held for more than two weeks running. It closed flat at $1.08 with 40 million shares traded.

Keppel DC Reit also saw active trading, coming off a fundraising exercise to partially fund acquisitions of two data centres. Units of the real estate investment trust closed up 13 cents or 7.22 per cent to $1.93 on a volume of 21.56 million units.

The Reit manager said on Monday that it had raised $478.2 million through a private placement of 135 million units at $1.744 each and a preferential offering of about 142 million units at $1.71 each. The private placement, announced on Monday, drew strong demand from new and existing investors, leading to the book being approximately 9.3 times subscribed.

Investors will be watching the US Federal Reserve overnight as it meets to announce its interest rate decision. According to a Bloomberg poll, a majority of economists expect a 25 basis point cut.

Mr Mati Greenspan, senior market analyst at social trading platform eToro, noted that the Saudi oil facility attacks are "quite serendipitous" for the Fed, as it has had limited justification for cutting interest rates amid a hot job market and optimal inflation.

"Now chairman (Jerome) Powell can easily cut the interest rate for the second time in a row and claim with confidence that global geopolitical tensions are causing a headwind that they want to be in front of," Mr Greenspan said.

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