Nov 16, 2007
Weak US$, rising oil prices trigger sell-off
WHAT looked like a rally on Tuesday turned into a dead cat bounce yesterday when the market gave up all its hard-won gains.
The trigger this time was the greenback's renewed weakness against the yen, although in a market this nervous, anything is likely to spark a selldown.
Blue chips were also battered by fresh fears of inflation as crude oil prices clawed back earlier losses this week and resumed their relentless drive towards US$100 a barrel.
'A dead cat bounce is a small recovery in share prices following a sharp fall. The broad market trend is still down,' said a dealer.
The mood change was tepid early on when the Straits Times Index (STI) fell by just 5.22 points at the opening bell, but the tone changed once the onslaught on bigger markets such as Hong Kong set in.
Selling was particularly acute during the five-minute interval after 5pm when traders closed their positions. This sent the STI down a further 12 points to close 47.32 points lower for the day at 3,477.59.
This level means that all the gains made since the United States Federal Reserve surprised markets with its bigger-than-expected interest rate cut of 0.5 percentage point on Sept 18 has been wiped out.
The Singapore market is in a 'correction mode', after falling 10.3 per cent from last month's record close of 3,875.77.
The significance was not lost on traders, who resumed selling Singapore Exchange (SGX) shares on fears that market conditions may quieten with investors shunning fresh positions. This is a real possibility, as overall market volume fell to 1.95 billion shares worth $1.97 billion.
SGX ended 20 cents lower at $13.60 on a volume of 3.9 million shares, after hitting a low of $13.30.
Banks were not spared either as fresh fears gripped investors over the write-offs European banks are making on mortgage-backed portfolios. Barclays said yesterday it would take a US$2.7 billion (S$3.9 billion) write-down. DBS Group Holdings fell 30 cents to $19.80, while OCBC Bank lost 15 cents to $8.40.
The market is also fielding downgrades on China stocks as nerves gripped the sector. This followed the ferocious selldown on Sino-Environment Technology Group, which fell nine cents to $2.19 yesterday, after having lost 78 cents on Wednesday.
Pine Agritech, which makes soybean-based products, lost 2.5 cents to 30 cents with 7.5 million shares traded. This takes its total fall since Monday to 32.6 per cent, a plunge sparked by its unveiling of a 40.4 per cent drop in third-quarter profit on the weekend.
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