SGX weighs amid broad sell off; 3,110 support eyed

Singapore shares lost 0.85% by midday on Tuesday as rating agency Standard & Poor’s cut in its U.S. credit outlook sparked selling across equity markets in Asia.

Losses in Singapore Exchange’s (SGX) shares also weighed on the broader index after it reported its lowest quarterly profit in two years, hurt by costs related to a failed takeover bid for Australian rival ASX (ASX.AX) and putting the spotlight on SGX CEO Magnus Bocker’s growth strategy.

By the midday break, the Straits Times Index (STI) <.FTSTI> was down 26.80 points at 3,117.58. The total value of shares traded in the morning session was $705.5 million, up from $543.7 million on Monday. Traders said they expected the STI to find support at 3,110 points.

 

“Singapore’s market today is in line with how the U.S. performed overnight after S&P’s credit outlook for the U.S. was lowered,” said Tey Tze Ming, a market strategist at Saxo Capital Markets.

 

Standard & Poor’s (S&P) threatened on Monday to downgrade the United States’ prized AAA credit rating unless the Obama administration and Congress find a way to slash the yawning federal budget deficit within two years.

 

It also slapped a negative outlook on the country’s top-notch credit rating.

 

“Moreover, many expect the U.S. Federal Reserve to signal an end to easy monetary policy, which is why liquidity is drying up and this is weighing on Asian equities as well,” said Tey, who expects the STI to see further downside of 3-4% in the next few months.

 

At the break, SGX shares were 1.7% lower at $7.94 with almost 3.1 million shares traded.

 

SGX said on Tuesday its third quarter net profit was $67.02 million, compared with $74.6 million a year earlier and missing analysts’ estimates of about $85 million.

 

Shares of coal miner Straits Asia Resources (STRL.SI) fell as much as 3.9% after Goldman Sachs added the firm to its “conviction sell” list and said market expectations for it were too high, traders said.

 

“Straits Asia is the most sensitive stock to a fall in coal prices versus its ASEAN peers,” the brokerage said, noting that the firm is the most expensive thermal coal stock in the world, trading at 19.8 times its price-earnings ratio for this year.