STI falls 0.7% as oil crosses US$100 mark again on US-Iran turmoil

[SINGAPORE] Singapore’s blue-chip stocks fell on Thursday (Sep 10), with investors cautious over fresh conflict in the Strait of Hormuz and a second consecutive day of oil rising above US$100 per barrel.

The Straits Times Index fell 0.7 per cent or 39.88 points to finish at 5,689.75.

Asset manager Keppel led the decliners, falling by 2.8 per cent or S$0.33 to S$11.47.

Two of Singapore’s three key lenders were also down: DBS fell 0.9 per cent or S$0.71 to S$76.79, and UOB slipped 0.5 per cent or S$0.19 to S$40.99. OCBC , however, rose by 0.1 per cent or S$0.04 to S$31.39.

The STI’s top gainer was Jardine Matheson , which was up 0.8 per cent or US$0.45 at US$58.08.

Within the iEdge Singapore Next 50 Index, glovemaker Top Glove advanced the most, rising 18.7 per cent or S$0.037 to S$0.235. China-focused Sasseur Reit was index’s biggest decliner, down 5.9 per cent or S$0.04 at S$0.64.

Across the broader market, decliners outnumbered advancers 359 to 201, after 1.2 billion securities worth S$1.8 billion changed hands.

Key regional markets echoed the tepid sentiment in Singapore.

The FTSE Bursa Malaysia KLCI fell 0.5 per cent; Hong Kong’s Hang Seng Index was down 1.3 per cent; and South Korea’s Kospi dipped 0.3 per cent. However, Japan’s Nikkei 225 rose 0.2 per cent.

Investors are on alert after Brent crude crossed the US$100 mark for a second consecutive day on Thursday.

This came as Iran claimed to have attacked over a dozen vessels seeking to pass the Strait of Hormuz. The last time oil prices crossed the US$100 threshold was in July.

The renewed tensions, combined with the global bond rout, have turned investors cautious, said RHB’s group chief economist Barnabas Gan.

Fund flows suggest that global traders have “adopted the classic playbook of shoring up defensive exposure in fixed income, while shedding risky ones in equities”, he said.

But there are resilient segments. Gan believes that Malaysia – a net exporter of crude oil and petroleum products – could be a “strong bastion” against the current volatility.

He noted that Malaysian crude grades still command “significantly higher premiums” over dated Brent.

The country primarily produces “light sweet” crude grades, which command premium prices due to their low sulphur content, lower refining costs, and strong yields of petrol, diesel and jet fuel.

While Malaysia generally exports these premium grades, its domestic refiners import the Middle East’s relatively cheaper “medium and heavy sour” crude.

“This quality arbitrage has historically supported export earnings, trade balances and oil-related profitability even when overall production volumes were trending lower,” said Gan.