Straits Times Index sinks to 3-year low on growing coronavirus fears

Singapore stock benchmark Straits Times Index (STI), which tracks the top 30 listings on the Singapore Exchange, has fallen to a three-year low, as the coronavirus outbreak outside of China accelerates.

On Friday 06 March, the STI declined 1.64% to 2,969.37 within the first 90 minutes of trading. As of 11.50am, share prices of 29 out of 30 constituents on the index are down.

The day’s biggest drops so far are CapitaLand Limited (-2.17%), DBS Group (-2.5%), Jardine Strategic (-2.94%), Oversea-Chinese Banking Corporation (-2.02%), United Overseas Bank (-2.06%), and UOL Group (-2.05%).

This is the index’s lowest price level since New Year’s Day in 2017, when it had gotten down to 2,962.63.

Read also: Top 5 Singapore stocks impacted by the coronavirus

Asia markets down on Friday morning

The STI was not the only benchmark that fell on Friday morning. Most Asian markets were also down, with the coronavirus outbreak globally worsening. Total reported cases outside of China now stands at over 17,000.

Japan’s Nikkei index dived by 2.8%, South Korea’s KOSPI slid 2.3%, the Hang Seng Index in Hong Kong erased 1.9%, while the Shanghai Composite Index lost another 1.2% to start the day.

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Analysts say investors are now starting to reassess the risk factors of the coronavirus, whose rate of infection had picked up pace in the last two weeks. There are now nearly 4,000 cases in Italy, over 300 in France and Germany, 261 in Spain, and 115 in the UK.

‘Optimism overseas is fading and now people are really starting to question just how bad things will get,’ said Takuya Kanda, general manager of research at Gaitame.com Research Institute in Tokyo.

‘For some investors, treasuries are the only place to park their money, but for others buying the dollar or stocks is out of the question.’

Read also: Top 5 Singapore stocks to buy in March 2020

No end in sight yet for the global risk-off sentiment

The STI’s latest price tumble extends its losses from last Thursday 27 February, which saw global financial markets crash and burn as the contagion entered new territories for the first time.

The S&P 500, for instance, experienced its biggest one-day decline on record, as it sunk 4.42%. It also recorded the fastest market correction ever – outdoing even the 2009 financial crisis and 1929 Great Depression – losing 12% in just six days.

Global markets – including the STI – had followed suit. The STI fell 3.23% that very day, with all 30 constituents recording losses. For the month of February, the benchmark shaved off 4.5% in price for its biggest monthly drop since August 2019.

One trader had told Singapore national broadsheet Straits Times after last week’s risk-off: ‘Following sell-offs this week, the banks are now trading at a dividend yield of more than 5 per cent but in the current environment, shares could still go lower.’

With the US lowering interest rates by 50 basis points on Tuesday 03 March in an emergency move – and other major central banks, including China, expected to follow suit – markets are bracing themselves for more losses in the coming weeks.

On the forex side, the USD/SGD and USD/JPY had fallen over 20 pips each following the rate cut announcement.

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