STI falls as China GDP growth slows

Continued trade tensions as well as a slip in China's headline gross domestic product (GDP) from the first quarter led Singapore's key Straits Times Index (STI) to finish lower yesterday.

Analysts think that this may only be the start, as China's economy could be harder hit if the trade war escalates.

The index lost 27.56 points to finish 0.85 per cent lower at 3,232.79. Turnover came in at 1.73 billion shares worth $890 million versus last Friday's 1.72 billion shares worth $917.5 million. Losers outnumbered gainers with 237 counters down and 159 counters up.

In the local bourse, all three banks slid in intraday trading, with United Overseas Bank leading the losses in the bourse with a fall of 1.9 per cent or 51 cents to $26.04.

DBS Bank finished 1.4 per cent or 38 cents lower at $25.87, while OCBC Bank retreated 1.4 per cent or 16 cents to $11.14.

City Developments (CDL) fell six cents or 0.6 per cent to $9.64, after recent property cooling measures prompted equity analysts to downgrade their ratings of several developers including CDL on account of their Singapore residential exposure. About 2.2 million shares of the stock had been traded by market close.

Share prices of private cord blood banker Cordlife Group rose 5.8 per cent or 3.5 cents to end at 64 cents, following its response to the Singapore Exchange after being queried on its unusual price movements last Friday.

It is in "confidential and non-binding discussions" on possible structuring transactions.

The day's most active counter was BlackGold Natural Resources which lost 1.4 cents or 34 per cent to $0.027. About 32.9 million shares changed hands after the coal company issued a clarification yesterday, distancing itself from allegations of corruption over a power plant project in Riau, Indonesia.

Other Asian markets closed mixed, under pressure from China's 6.7 per cent GDP growth in Q2 2018, which - though in line with expectations - was at its slowest since 2016.

Benchmark indices in Malaysia and Hong Kong gained slightly, while those in China, South Korea and Australia fell.

In Europe, gains in strong industrials and pharma stocks barely edged out the effects of slowed Chinese growth, with the pan-European STOXX 600 climbing 0.2 per cent.

"We have not seen the worst yet," Ms Iris Pang, economist at ING Bank NV in Hong Kong, told Bloomberg.

"For the rest of the world, it begins with a bilateral trade war between the US and China - but it would not end with a bilateral impact.

"Global supply chains, shipping companies, foreign investment hurdles from the US government at the same time as China pledges to welcome more foreign investment will change global business flows."

The trade war appears to be mere background noise to the US markets, as the S&P 500 rose by 1.5 per cent last week for the second week in a row and is trading above the key level of 2,800, said FXTM chief market strategist Hussein Sayed.

IG Markets strategist Pan Jingyi suggested US investors' optimism could be buoyed by company earnings instead.

She said: "Despite the ratcheting up of tension with President Donald Trump's US$200 billion (S$270 billion) tariffs threat, investors have evidently deflected towards the earnings optimism as seen via the S&P 500 index's sector breakdown."

Mr Sayed said investors and traders will be keeping an eye on Fed chair Jerome Powell's semi-annual testimony before Congress today.

He said: "Although he is likely to remain upbeat on the US's economic growth prospects, he still needs to address how the central bank will react if the ongoing trade disputes escalate further in the coming months.

"Any signs of slowing down the pace of interest rate hikes will drag the dollar lower."