Falling commodities prices send stocks lower

THE fall in oil prices to a five-month low, as well as declines in commodities like gold and copper, triggered a stock sell-off in Asia. And the selling wave was spreading west, reminiscent of the severe correction seen in May this year.

Relative to other regional bourses, however, the decline in the Singapore Straits Times Index was moderate. It shed 21.63 points or 0.86 per cent to 2,488.51.

In Tokyo, the Nikkei 225 fell 1.8 per cent; in Hong Kong, the Hang Seng Index was down 1.2 per cent; while Korea's Kospi sank 1.5 per cent. India, whose Sensex 30 Index has surged 250 per cent since 2003, sagged by more than 3 per cent at 6pm Singapore time.

Only markets in China, Taiwan, the Philippines and Sri Lanka managed to eke out some gains.
Crude oil for October delivery fell as much as 1.1 per cent to US$65.55 a barrel in after-hours trading in New York, extending a five-day, 5.7 per cent drop. Oil's longest losing streak in almost three years came on the back of hints from Iran - the world's fourth-largest oil producer - that it may suspend efforts to enrich uranium, ending a dispute with the United Nations. Meanwhile, copper also suffered its biggest drop in two months on fears that global growth is slowing thus leading ot falling demand.

In Singapore, stocks which had been buoyed by high oil prices came under some selling pressure. Keppel Corp and SembCorp Marine, the world's two biggest oil rig builders, fell 40 cents and 14 cents or 2.6 per cent and 4 per cent respectively.

The banks were also weak, with DBS Group losing 30 cents or 1.6 per cent to $18.10 - shaving nearly five points off the STI. UOB and OCBC also ended lower.

Profit-taking also set in for recent listings like Synear (down 3.2 per cent) and Wilmar (down 4.3 per cent).

Singapore Telecommunications, meanwhile, held up pretty well with a two-cent loss to $2.47 after Merrill Lynch downgraded it to a 'Sell', saying Southeast Asia's biggest telecoms company is facing growing risks to its earnings, including a massive write-down of its investment in Australian unit Optus.

While oil-related stocks were hammered, Singapore Airlines, on the other hand, was seen as a beneficiary of lower oil prices. The world's most profitable airline advanced 30 cents or 2.2 per cent to $14.20. Other gainers included Venture Corp, and electronics contract manufacturers like Brilliant, Fischer, Magnecomp and Seksun.

Excluding warrants, losers slightly outnumbered gainers by 207 to 161. Activities were moderate with 857.2 million Singapore dollar shares worth $864.8 million traded.
In its strategy update on the Singapore market, CIMB-GK Research warned investors to be cautious about companies with export-led earnings as the spectre of US consumption slowdown looms. Meanwhile, it thinks it is too early to sell the offshore and marine sector, with its top pick being Labroy Marine. It still prefers property stocks over financial counters. And it continues to like China domestic consumption plays like China Hongxing, Delong, Fibrechem and Pine Agritech. Among small caps, it has its eyes on Innovalues, LMA and Seksun.