Relief for now.. Oil price eases as US dollar rise

Nov 14, 2007

TAKING STOCK
ST Index pares losses as US dollar rises, oil prices ease

A NERVOUS calm descended upon the Singapore stock market yesterday, as blue chips recovered some of their poise after the greenback steadied against the yen. The market mood was also sweetened by a host of heartening news - crude oil easing below US$95 per barrel to US$94.62, down US$1.70, and gold slipping under US$800 an ounce.

Yesterday, stocks in the United States opened higher after Wal-Mart reported solid results and oil prices fell from record levels. In early trading, the Dow Jones Industrial Average was back above the 13,000 mark.

The Dow was up 173.06 points, or 1.33 per cent, at 13,160.61 after two hours of trading. The Nasdaq Composite Index climbed 50.68 points, or 1.96 per cent, to 2,634.81.

In Singapore, bargain hunters were attracted out of the woodwork in late trading yesterday to snap up badly battered blue chips, after the benchmark Straits Times Index (STI) had fallen 78 points. Their buys helped the index to halve that loss to close 35.65 points down at 3,475.47.

But jitters over the worsening credit crisis in the US were still very much on investors' minds. Their nerves could be set on edge again if there are write-downs unveiled by HSBC Finance when it announces its third-quarter results today.

'What caused a change in sentiment is the ability of the US dollar to hold out against the yen at current levels. This gives investors confidence that the yen carry trade will not unravel further,' said a trader yesterday.

Dealers had attributed the region- wide sell-off on Monday to hedge funds trimming their positions to repay the yen loans they had originally taken due to Japan's very low interest rates.

These funds had been forced to cut their losses, as the greenback fell by more than 5 per cent against the yen over the past two weeks, while jitters over US credit woes caused regional stock markets to tumble.

Yesterday, the US dollar rose by 0.07 yen to 110.07 yen - its first gain in five days.

This enabled the Singapore Exchange, a hot favourite among hedge funds, to trim its losses, after it suffered another battering in morning trades. It ended 60 cents down at $13, but off its intraday low of $12.70.

Shipyard stocks enjoyed some breathing space as the selling pressure eased.

And S-shares - China listings in Singapore - managed to recover most of their early losses, as Hong Kong's Hang Seng Index swung from a staggering 713-point loss in the morning to close 137.62 points higher at 27,803.35.

Source: The Straits Time