Singapore stocks falter ahead of MSCI reweighting

SINGAPORE shares retraced some of their earlier gains on Tuesday in another sign that the market remains tentative about a smooth return to normalcy amid threats of a second wave of Covid-19 infections and renewed US-China trade tensions.

Trading was also cautious ahead of the MSCI reweighting later on Tuesday, which will see some stocks added or removed from global indices depending on their market value.

The Straits Times Index (STI) opened at 2,582.55 and hit an intraday high of 2,590.51 before closing at 2,587.81, down 23.50 points or 0.9 per cent. About 1.44 billion securities, worth S$1.18 billion, were traded.

The STI has bounced off its low of 2,233.48 on Mar 23 as the Covid-19 spread globally. Year-to-date, it is down 20 per cent. But the sustainability of any rally remains in question amid the poor corporate outlook and weak economic data, even as countries look to reopen after months of frozen economic activity.

Confusion over Singapore Airlines (SIA)'s rights shares and mandatory convertible bonds (MCB) continued to plague retail investors. Both SIA's rights shares and rights MCBs will start trading on Wednesday.

Brokers reminded clients who have SIA in their central depository (CDP) that their rights should have been credited into the CDP account. They can choose to sell their rights as per normal.

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Investors who have used Central Provident Fund (CPF) or Supplementary Retirement Scheme (SRS) accounts to buy SIA, need to check with the respective investment bank before they sell their rights shares or rights MCBs.

"Client who have SIA rights or SIA MCB rights in your SRS or CPF, when you want to sell, you will not be able to sell; you will not be able to select CPF or SRS. Please sell it as cash trade and inform trading representative to amend the contract to CPF or SRS. This is super important,'' advised one remisier.

He added that all CPF and SRS amendments have to be done on the same day to avoid naked selling.

SIA raised S$8.8 billion by issuing rights, and raised another S$3.5 billion via a 10-year MCB issue on the basis of 295 rights MCBs for every 100 existing shares owned.

The national carrier closed at S$4.29, down 12 Singapore cents, or 2.7 per cent.

DBS led the top value stocks, shedding more than 3 per cent to close at S$19.35 on concerns that banks will face a more difficult road post-pandemic.