Shares slightly lower by midday ahead of German vote

Singapore shares edged lower by midday on Thursday, paring some of the earlier loss, ahead of a vote in Germany’s parliament later in the day to approve new powers for the euro zone’s 440 billion euro ($774 billion) rescue fund.

At 1:00 p.m., the Straits Times Index (STI) <.FTSTI> was down 0.1%, or 2.50 points, at 2698.67. Around 364.5 million shares worth $399 million were traded, compared with 698 million shares worth $580 million by the same time on Wednesday.

German Chancellor Angela Merkel faces a battle for her political survival as some of her coalition, worried about throwing good money after bad by bailing out Greece, could humiliate her in a parliament vote on euro-zone rescue schemes.

 

“On a broad level, what Europe needs is to reinstall confidence. The problem is nobody wants to pay for it,” said Tey Tze Ming, a market strategist at Saxo Capital Markets.

 

“From July to middle of August we saw a big slide in the Singapore market,” he said. “The market could bottom out as early as November, but the bad news is that before this happens we might see another drop in that kind of magnitude.”

 

Bank of America-Merrill Lynch said in a report that it expects Singapore to slip into a technical recession in the third quarter, and its GDP growth forecast now stands at 4.5% for 2011 and 4.3% for 2012.

 

“Historically, office has been the most vulnerable to economic slowdowns and we now turn incrementally more negative on the office market,” the bank said, adding that coupled with rising supply, vacancy rates are likely to continue rising.

 

It expects Grade A rentals in the city-state to fall 13% to $8.25 per square foot in 2012. The bank maintained its underperform rating on office REITs — CapitaCommercial Trust (CACT.SI) and Suntec REIT (SUNT.SI).

 

Singapore rig builder counters fell on Thursday as concerns about the increasingly uncertain global economic outlook pushed oil prices down.

 

Shares of Keppel Corp (KPLM.SI) fell as much as 3.7% while Sembcorp Marine (SCMN.SI) slumped as much as 2.9%. At 1:00 p.m., Keppel stock was down 2% and Sembcorp stock was 1.2% lower.

 

UOB Kay Hian downgraded the Singapore shipyard sector to market weight from overweight, citing a possible slowdown in orders.

 

However, shares of container shipping firm Neptune Orient Lines (NEPS.SI) outperformed the broader market, up 4.6% at 1:00 p.m. Traders said the lower oil price may lead to reduced fuel costs.