Singapore shares drop 1% on Monday as strong US jobs data dims hopes for big Fed rate cut

BOTH the local equities market and its Asian peers felt the sting of last Friday's strong US jobs report which undercut hopes for an aggressive Federal Reserve interest rate cut in July.

This saw the local Straits Times Index (STI) finish 32.58 points or one per cent down at 3,334.23.

Elsewhere in the Asia-Pacific, Australia, China, Hong Kong, Japan, Malaysia and South Korea all closed lower.

Vanguard Partners managing partner Stephen Innes noted that after the strong payrolls report, "there some concerns that (Fed) chair Powell could walk down some of the market aggressive Fed rate cut pricing, and this too is having a significant impact on the investor psyche".

Mr Innes added that Asian indices were also weighed down by "escalating trade friction between Japan and South Korea not to mention the monumental slide in Samsung's profits".

In Singapore, trading volume clocked in at 1.12 billion securities, 94 per cent of the daily average in the first five months of 2019. However, total turnover came to S$1.06 billion, in line with the January-to-May daily average.

Across the market, decliners trumped advancers 306 to 132. Meanwhile, the benchmark index had 25 of the STI's 30 components trading in the red.

Singtel, which dropped S$0.08 or 2.3 per cent lower to S$3.48, was the benchmark index's most traded stock with 30.8 million shares changing hands. The telco's shares saw heavier-than-usual trading after DBS Group Research downgraded its recommendation on the counter from "buy" to "hold" but increased the target price from S$3.55 to S$3.60.

DBS analyst Sachin Mittal said that Singtel's recent rally could be losing steam, and investors may consider the opportunity to take some profit after the run-up.

Along with the broader market, the local banks returned from the weekend lower. DBS Group Holdings was S$0.26 or one per cent lower at S$25.37, OCBC Bank dropped S$0.08 or 0.7 per cent to S$11.31 and United Overseas Bank (UOB) traded at S$26.07, easing S$0.19 or 0.7 per cent.

In a Monday report, RHB Research Institute analyst Leng Seng Choon said: "Market expectations of softer 2019 GDP growth for Singapore and a cut in US Federal funds rate in the (second half of 2019) could dampen investors' appetite for Singapore banks. However, with economic recovery likely in 2020, we remain bullish on the sector."

Real estate investment trusts (Reits), which have hogged the limelight on the back of dovish stances from central banks, saw pullbacks from investors. At Monday's closing, the iEdge S-Reit 20 Index lost 12.10 points or 0.8 per cent to 1,469.96.

Healthcare player Health Management International (HMI), which resumed trading on Monday morning after an offer by its management and private equity firm EQT to take the company private, shot up S$0.06 or 9.1 per cent to end at S$0.72, one cent below EQT's offer price of S$0.73.

Analysts advised that investors accept the offer. Maybank Kim Eng downgraded HMI from "buy" to "hold", advising investors of HMI to take the S$0.73 offer price as the valuation "appears fair" and is a clean exit. UOB Kay Hian has also advised clients to accept the offer by EQT, and CGS-CIMB is of the view the offer is "fair but not compelling".