Business Times - 14 Sep 2001

CLOSING MARKET REPORT Forced selling brings index down to 1,400

WAVES of forced selling brought on by margin calls and fund redemptions today sent the Straits Times Index reeling by 38.37 points or 2.6 per cent to 1,400.3. At the same time, markets in Thailand, Taiwan, Malaysia and Korea collapsed by 3 to 6.6 per cent as uncertainty mounted over the potential fallout from Tuesday's terrorist attacks on the US.

Although the Japanese and Hong Kong indices rose for the second day running, the near-unanimous opinion of analysts is that such rallies will prove short-lived.

"No one can predict what Wall Street will do on Monday," said an institutional dealer. "But it's highly unlikely that stocks can rise with the economy now pushed over the brink of recession."

Research outfit IdeaGlobal said that after conversations with senior fund managers and strategists, the two main worries on the minds of big players are any dent to US consumer sentiment and higher oil prices brought on by this week's tragic events.

Although higher oil prices are a virtual certainty - observers reckon there's about a 50 per cent chance of prices shooting beyond US$35 a barrel - IdeaGlobal said the impact on US consumer spending is an unknown.

Here, rising oil prices were cited as a major reason for a massive selldown in Singapore Airlines shares. Other reasons given were news that SIA's share of Air New Zealand's loss will increase and that US airspace will be closed until further notice.

Kim Eng Securities downgraded its earnings forecasts for SIA, saying that although the counter may be a "buy" on valuation grounds "there is no hurry to do so given the negative newsflow expected over the next few months". The local broker also pointed out there is a risk SIA stock may slip below its book value if sentiment continues to sour.

SIA lost 80 cents or 8.3 per cent to a 30-month low of $8.85 on volume of 8 million shares.

The Properties Index, in the meantime, sank to a three-year low, the Electronics Index to a 33-month low and the Finance Index to where it was at the start of this year.

Brokers said forced selling triggered by margin calls swept through the market first thing in the morning, setting off a price slide that was abetted by fund redemptions.

Volume excluding foreign currency issues was 360.8 million units worth $537.6 million, compared with $416.6 million on Thursday. Only 20 counters rose versus 341 that fell.

Although the fund redemptions were described as "not overly large", dealers pointed out the real selling may not have begun as Wall Street is closed until Monday.

Monday also sees the release of Singapore's August trade figures, which are expected to reinforce market worries about a full-blown recession.

Elsewhere in the region, the Nikkei index rallied 395.8 or 4.1 per cent to 10,008.89 today, while the Hang Seng added 86.24 to 9,655.45.

But other regional indices made for dismal reading. Thailand's SET was the worst off, plunging 6.6 per cent to bring its two-day loss to 13.3 per cent. The Thai market was closed on Wednesday.

Similarly, the Taiwan index shed 4.5 per cent for a two-day loss of 9.6 per cent and Malaysia's KLSE Composite sank 3 per cent for a two-day loss of 6.7per cent.

Copyright © 2001 Singapore Press Holdings Ltd

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-- Martin Thompson (mthom1927@aol.com), September 14, 2001