The Singapore stock market has finished lower in two of three trading days since ending the four-day winning streak in which it collected more than 120 points or 6.5 percent en route to a fresh eight-month high. The Straits Times Index slid below support at 1,875 points, and now investors are expecting to see those losses accelerate at the opening of trade on Tuesday.
The global forecast for the Asian markets is sharply negative after disturbing earnings news from Bank of America, which is expected to put financial stocks under heavy pressure throughout the region. The price of crude oil also plummeted overnight, which could put the heat on many of the resource stocks. The European and U.S. markets all suffered heavy losses across the board, and the Asian bourses are expecting a similar fate.
The STI finished sharply lower on Monday, as the financials and property stocks fell under heavy selling pressure throughout the session.
For the day, the index dropped 21.71 points or 1.14 percent to close at 1,874.85 after trading between 1,857.00 and 1,896.32. Volume was 1.72 billion shares worth 1.06 billion Singapore dollars. There were 264 decliners and 199 gainers, with 738 stocks finishing unchanged.
Among the decliners, DBS Group slid 1.6 percent and Oversea-Chinese Banking Corp lost 2.8 percent, while United Overseas Bank, City Developments, CapitaLand, Singapore Airlines and Singapore Telecommunications also finished lower. Bucking the trend, Keppel Corp and Keppel Land wound up slightly higher.
The lead from Wall Street is broadly pessimistic as stocks moved sharply lower over the course of the trading day on Monday, with the major averages giving back some ground after closing higher for six straight weeks. A negative reaction to the latest earnings news inspired traders to do some profit taking.
Bank of America released its first-quarter results before the market open. While the company posted a better earnings figure than analysts had expected, a significant increase in loan loss protection made investors wary of holding onto the stock.
On the economic front, the Conference Board said its leading economic index fell 0.3 percent in March following a revised 0.2 percent decrease in February. The agency noted that the index has not risen in the past nine months.
In merger news, Sun Microsystems (JAVA) agreed to be acquired by Oracle (ORCL) for $9.50 per share in cash. The offer represents a 42 percent premium to Sun's closing price on Friday. Oracle expects the acquisition to be accretive to its earnings by at least $0.15 per share on a non-GAAP basis in the first full year after closing.
Additionally, Pepsi Bottling Group (PBG) and PepsiAmericas (PAS) showed strong upward moves after PepsiCo (PEP) offered to acquire both bottlers for about $6 billion.
Also, with the price of crude oil showing a steep decline, closing down $4.45 at $45.88 a barrel, the oil services sector saw substantial weakness. Reflecting the weakness in the sector, the Philadelphia Oil Services Index closed down 6.7 percent.
The major averages saw some further downside in the latter part of the trading day, ending the session near their worst levels of the day. The Dow closed down 289.60 points or 3.6 percent at 7,841.73, the NASDAQ closed down 64.86 points or 3.9 at 1,608.21 and the S&P 500 closed down 37.21 points or 4.3 percent at 832.39.
In corporate news, Moody's Investor Service on Monday lowered the outlook for the bank financial strength ratings of three Singapore banks to negative from stable. The banks include the DBS Bank Ltd, Oversea-Chinese Banking Corporation Ltd and the United Overseas Bank Ltd. The rating agency also lowered the outlook on the three banks' Aa1 long-term deposit and debt ratings to negative from stable.
Christine Kuo, Moody's Vice President and Senior Analyst said, The negative outlooks of DBS, OCBC and UOB reflect the fact that the deepening global economic downturn could have a protracted impact on their asset quality and earnings.
However, the analyst noted that all three banks have strong franchises, healthy credit profiles, liquid and well-capitalized balance sheets, and benefit from a very high level of support from the Singapore government.
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