Worries over US housing slump impact drag down Asian stocks

July 26, 2008
Worries over US housing slump impact drag down Asian stocks
Banks and property stocks drive STI lower, but for the week, index is
still up 2.6%
By CONRAD TAN REPORTER

STOCKS here and elsewhere in Asia tumbled yesterday after steep
losses in the United States overnight amid renewed worries over the
impact of the US housing slump on banks and the wider financial
sector.

The Straits Times Index (STI) ended 55 points or 1.8 per cent lower
at 2,922.91, after falling as much as 2.2 per cent earlier in the day.

For the week, the index is still up 2.6 per cent, after big gains on
Monday and Wednesday.

Banks and property stocks drove the STI lower yesterday, a day after
the Monetary Authority of Singapore raised its forecast range for
inflation this year to 6-7 per cent, from 5-6 per cent previously.

Higher inflation can trigger a repricing of stocks, especially if
investors believe that the policy response - a stronger local
currency or higher interest rates - may result in slower economic
growth.

Data released in the US on Thursday showing that sales of existing
homes in June fell to their lowest level in a decade prompted a sharp
fall in major US stock indices.

Worries over the impact of the US housing slump on the broader
financial sector extended into Asia-Pacific markets yesterday.

In Australia, the main stock benchmark fell 3.4 per cent after
National Australia Bank shocked investors by announcing that it would
set aside a further A$830 million (S$1.08 billion) to cover potential
losses from its exposure to US mortgages.

The news dragged down banking and other financial sector stocks
throughout the region.

Here, DBS Group, the largest of the three banks listed here by loans
book, was the main stock driving the STI lower, falling 1.9 per cent
to $19.38. United Overseas Bank, the second-biggest lender, declined
1.5 per cent to $19.08, while OCBC Bank ended 1.3 per cent lower at
$8.35.

The two biggest local developers, CapitaLand and City Developments,
also weighed on the index. CapitaLand fell 3.1 per cent to $5.91,
while CityDev finished 3.4 per cent down at $11.50.

Of the STI's 30 component stocks, 27 fell, one rose and two were
unchanged. Jardine Cycle & Carriage, a conglomerate with major car
distribution businesses and other holdings in South-east Asia, was
the only gainer, rising 0.4 per cent to $17.10.

Yanlord Land, a Chinese property developer, was the worst performer
among the index members in percentage terms, followed by shipping
group Neptune Orient Lines (NOL). Yanlord fell 6.1 per cent to $2,
while NOL slid 4.8 per cent to $3.15.

In the broad market, losers outnumbered gainers by 242-108, with 487
counters unchanged, excluding warrants and bonds.

Trading volume was lower than on Thursday, with 835 million units
worth $1.06 billion changing hands, including warrants and bonds but
excluding shares traded in foreign currencies.

The FTSE ST All-Share Index, which tracks 270 of the most liquid
stocks listed here, fell 1.6 per cent. But the UOB Catalist index of
stocks on the second board ended 1.2 per cent higher, as penny stocks
such as Junma Tyre Cord Co, Sapphire Corp and Medi-Flex rose 40-50
per cent on thin trading volumes.

Elsewhere in the region, major share indices fell, except in
Malaysia, where the Kuala Lumpur Composite Index ended flat. In
Japan, the Nikkei-225 index slid 2 per cent, while Hong Kong's Hang
Seng Index finished 1.5 per cent lower.