ST Index falls 0.8 per cent after the former Fed chief compounds fears of a China stock bubble
By TEH HOOI LING
SENIOR CORRESPONDENT
RETIRED US Federal Reserve chairman Alan Greenspan still packs a punch when it comes to having an impact on financial markets around the world. His comments, to a conference in Madrid via satellite, that China faces a 'dramatic contraction' and that the rally in Chinese shares 'is clearly unsustainable' sent stock prices in Asia tumbling across the board yesterday.
Mr Greenspan joins China's central bank governor Zhou Xiaochuan and Li Ka-shing, Asia's richest man, in expressing concern about a China stock 'bubble'.
The Straits Times Index shed 28.75 points or 0.8 per cent to 3,530.26. It was off its intra-day low of 3,510.19. Meanwhile the benchmark index in Australia was down by 1.2 per cent, Malaysia 1 per cent, Thailand 1.4 per cent, Jakarta 1.2 per cent, and Vietnam 2.5 per cent. Ironically, Shanghai and Shenzhen registered smaller losses of 0.5 and 0.7 per cent respectively, while Hong Kong was down a marginal 0.2 per cent.
One Chinese investor described Mr Greenspan's warnings on the Chinese market as similar to throwing small pieces of ice cube into boiling water - it will do little to cool it.
Leading the STI lower were Keppel Corp, which declined 40 cents or 3.5 per cent to $11.10. Banks like DBS and OCBC were also hefty losers.
'There is a lack of fresh local factors, so people are a bit more sensitive to external factors like any news about the health of the US or the Chinese economy or markets,' AFP quoted Najeeb Jarhom, head of research at Fraser Securities, as saying.
Meanwhile, Hugh Young, managing director at Aberdeen Asset Management Asia, was quoted as saying that 'it's hard to be bullish about anything at the moment because everything has done so well'. China, he warned, 'is another one of these classic hot and speculative markets that will end in tears'.
While dealers generally agreed that the market was overdue for a consolidation given the substantial gains it has made this year - the STI is up more than 16 per cent - they said a sharp correction is unlikely, given Singapore's strong economic fundamentals and continued flows of liquidity onto the market.
Among the notable gainers yesterday was Transpac, which surged 44 cents or 11 per cent to $4.54. Wilmar put on 30 cents or 9 per cent to $3.60, while K-Reit climbed 13 cents or just under 5 per cent to $2.90.
Also among the gainers was Singapore Exchange (SGX), which on Wednesday said that it was revamping its listing rules to transform the second board into one similar to London's Alternative Investment Market. Analysts generally view that positively, with JP Morgan upgrading the stock to 'overweight' from 'neutral'. The US broking firm lifted its target for SGX to $9.20, on the expectation that it could generate more volume as a result of a reduction in bid-ask spreads. Yesterday, SGX ended five cents up at $7.60.
Overall, excluding warrants, losers overwhelmed gainers by 385 to 117. Some 2.35 billion Singapore-dollar shares worth $2.28 billion changed hands.
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