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STI plunges 6% in worst one-day fall since Oct 1987

Asian markets battered on fears of a US recession and possible writedowns by regional banks


SINGAPORE’S market yesterday suffered its worst one-day fall since the Black Monday crash in October 1987 while other Asian bourses had to go back to the Sept11, 2001, terror attacks for a day as bad as this.

The Straits Times Index was the region’s second-worst performer, diving a jaw-dropping 187.1 points, or 6.03 per cent, in the frenzied, fear-driven bail-out. The STI has now fallen 15.8 per cent since Jan 1, wiping $62 billion off the value of local shares.

India was the worst performer yesterday, with the Sensex Index initially plunging 12 per cent before a late recovery brought the final dip to 7.41 per cent.

Other casualties stacked up across the region – Hong Kong’s Hang Seng Index fell 5.5 per cent, Tokyo’s Nikkei-225 was down 3.9 per cent, and China’s resilient Shanghai Composite dived 5.14 per cent.

The causes were the same factors that have been hammering markets for months – a possible recession in the United States and concerns that regional banks will be hit by the massive writedowns that have belted Western banks.

‘Irrational fear is stalking regional markets. Fundamentally, things haven’t changed, and the economy is humming along nicely,’ said CIMB-GK research head Song Seng Wun.

One dealer said hedge funds – powerful investment vehicles with billions at their command – were trimming their positions across the region ahead of possibly more bad news from the US.

‘With the US markets closed for Martin Luther King Day, the funds are left rudderless as they struggle to find directions in the gloom and this is exacerbating the panic selling region-wide,’ he said.

Financial shares took the biggest hit. Bank of China and HSBC Holdings came under heavy attack, with investors spooked by fears of their balance sheets being hurt by big sub-prime writedowns, following Citigroup and Merrill Lynch’s massive losses.

DBS Group Holdings was one victim here, falling an eye-popping $1.18 to a 17-month low of $17.50. But SingTel’s 7.7 per cent slide to $3.58 and Keppel Corp’s 5.6 per cent fall to $10.80 stunned investors as well.

European markets were also well down when they opened yesterday afternoon. Financial stocks there sank on concerns of their possible exposure to the bond insurance market, which has been tainted by the US mortgage crisis.

At close, London’s FTSE-100 Index was down 5.48 per cent, Paris’ CAC Index fell 5.88 per cent, while Frankfurt’s Dax Index tumbled 7.16 per cent.

Even booming commodities markets suffered. Oil fell US$1.68 (S$2.42) to US$88.98 a barrel on fears of falling demand if the US slips into recession, and gold fell US$13.17 to US$870 an ounce.

However, anxiety over the US economy may be soothed over coming weeks if the financial results of multinationals such as Microsoft and AT&T are robust.

‘But more disappointing earnings could send stock prices down further, as they fuel the risk of a recession,’ warned Deutsche Bank Private Wealth Management’s chief Asian strategist Marshall Gittler.

But some traders here saw yesterday’s nosedive as a golden opportunity to pick up blue chips like DBS and UOB. ‘I view this sell-off as the last shoe dropping and I am sinking all my remaining funds into blue chips,’ said local remisier Bernie Tan.


Source: The Straits Times 22 Jan 08


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