Shares down by midday; higher volatility seen

Singapore shares fell by midday on Wednesday as traders booked profits from the previous day’s rally, underscoring the higher volatility in the market due to the lack of concrete news on how European leaders will tackle the region’s debt woes.

By 1:00 p.m., the Straits Times Index (STI) <.FTSTI> was down 0.6%, or 14.90 points, at 2,711.01.

Around 698 million shares worth $580 million were traded, compared with around 606.4 million shares worth $568 million at the same time a day earlier. The STI added 2.7% on Tuesday.

 

“We are still getting dribs and drabs of headline news out of the euro zone with nothing firm. We are definitely seeing increased volatility and people trying to play that volatility,” said Jason Hughes, head of premium-client management at IG Markets Singapore.

 

“The only real solution is to get to a single fiscal policy where everything can be aligned between the countries using the single currency. Anything else would just be papering over the cracks and leading to issues down the road,” he added.

 

Greece faced a new test in its attempt to avoid bankruptcy on Wednesday as international auditors headed for Athens, while Germany suggested a new bailout may be renegotiated as argument rages over whether private creditors should take bigger losses.

 

Several Singapore stocks that rose in the previous session were down at 1:00 p.m. Commodity counters Olam International (OLAM.SI) and Noble Group (NOBG.SI) slumped 1.7% and 2.1% respectively.

 

Rig builders Keppel Corp (KPLM.SI) and Sembcorp Marine (SCMN.SI) lost 2.3% and 3.1% respectively. DBS (DBSM.SI) and United Overseas Bank (UOBH.SI) also gave up 0.7% and 1.2%.

 

Shares of Oversea-Chinese Banking Corp (OCBC.SI) and Singapore Airlines (SIAL.SI) held up, however. At 1:00 p.m., OCBC shares were flat while SIA stock was 0.3% higher.

 

OCBC Investment Research had initiated coverage of SIA with a buy rating and a target price of $12.59. “While the threat of recession is very real, the market seems overly eager to price a recession into SIA’s share price,” it said.

 

OCBC cited the carrier’s resilience amid intense competition as well as its standing as a premium airline and strong balance sheet. Growth could also come from SIA’s new low-cost carrier if cannibalization effects are minimized, OCBC added.