STI dives to near 2,300 as US dollar soars

SINGAPORE: Singapore’s stock market joined yet another global sell-off on Thursday (Mar 19), while the US dollar surged, as massive stimulus and emergency central bank measures in Europe, Japan, the United States and Australia failed to halt a fresh wave of panic-selling over the coronavirus pandemic.

The Straits Times Index came close to falling below 2,300 as it touched an intra-day low of 2,303.9. This is the lowest level since 2,258.72 in July 2009, according to investing.com.

The index closed down 4.73 per cent at 2,311, with 448 losers compared with 116 winners.

“We’re in this phase where investors are just looking to liquidate,” said Prashant Newnaha, senior interest rate strategist at TD Securities in Singapore.

Seoul tanked more than 8 per cent, Sydney lost more than 3 per cent and Tokyo and Shanghai ended down 1 per cent each. Hong Kong was 2.6 per cent off, while Taipei and Jakarta crumbled more than 5 percent.

The sharp losses were in tandem with a surge in the dollar as investors scrambled for cash to pay debts or just stash away.

The US dollar hit a 10-year high against the Singapore dollar at 1.4547.

The latest rout in Asia followed another day of carnage on Wall Street, where the Dow ended down more than 6 per cent and below 20,000 for the first time since 2017 as traders feared that the spiralling pandemic could tip the world into a severe and long-lasting recession.

“There’s no buyers, there’s not much liquidity and everyone is just getting out,” said Chris Weston, head of research at Melbourne brokerage Pepperstone.

The sell-off followed an attempt at stabilising in morning trade, with an ECB pledge to buy 750 billion euro (US$820 billion) in bonds through 2020 offering some support.

In the afternoon the US Federal Reserve promised a liquidity facility for money market mutual funds, while the Bank of Japan made two unscheduled bond purchases totalling 1.3 trillion yen (US$12 billion).

The Reserve Bank of Australia also cut interest rates to a record-low 0.25 per cent and announced a historic foray into quantitative easing.

But as with previous massive stimulus measures already announced by central banks around the world, it offered little salve to dire sentiment.

“I’d say the market is uninvestable at this point,” said Daniel Cuthbertson, managing director at Value Point Asset Management in Sydney. “Until we get a containment of global contractions, the market is just going to be directionless.”

DBS said on Thursday that a recession in Singapore is “inevitable”.

“A recession in Singapore appears inevitable and we have revised our full year GDP growth forecast for 2020 to -0.5 per cent to reflect the recession scenario,” said DBS economist Irvin Seah. DBS’s prior estimate was for the economy to grow 0.9 per cent.

The government has already signalled a chance of a recession this year and cut its growth forecasts.