Flash News: Market Update

The Singapore stock market plunged almost 3 per cent this afternoon as the government announced strict curbs amid a spike in Covid19 cases.'

The Straits Times index dived by as much as 99 points to a low at 3023.95 just after 2 pm as news of the curbs hit.

As expected, stocks in the travel, property, hospitality and F&B sectors took the most direct hit.

Singapore Airlines dived 5.66% to S$4.50, while SATS lost 3.90% to S$3.69. Other losers included ComfortDelgro, City Development, ThaiBev and SingTel. Most of the S-Reits sector was also hit.

On the other hand, supermarket operator Sheng Siong surged 10.66% to a new recent high at S$1.66 as queues built up at supermarkets. Keppel DC was also up, gaining 0.78% to S$2.58.

In all, the market lost more than S$20 billion today.

After the initial panic selling some semblance of calm returned to the market, helping the Straits Times Index recoup some losses.

Market experts advised investors to manage their portfolios in the coming days. One way to do this would be average down on stocks which have shown the ability to bounce back after last year's lockdowns.

"The latest Covid-related restrictions by the Government are necessary to prevent the situation from getting worse," said Vasu Menon, executive director for investment strategy at OCBC Bank. "We have seen how things have gotten much worse very quickly elsewhere, when Governments failed to react fast enough. The Singapore stock market reacted by pulling back sharply, which is normal as investors were surprised and didn’t expect the Government to act so quickly and extensively. However, bear in mind that the restrictions may not have a lasting impact on the Singapore economy if it reduces infection numbers fairly quickly, in which case the latest measures will be lifted sooner than what many investors may be fearful of."

He pointed out that the Government is aware that a prolonged period of tight restrictions will only hurt the economy.

"Having had a great deal of experience dealing with Covid-19 in the past 14 months, the response and containment this time around is likely to be faster and more effective than a year ago," he said. "The pullback in the Singapore stock market is a healthy breather and there is no reason to turn bearish on the local bourse simply because of a correction caused by short term measures to rein in Covid-19 infections."

The market is likely to remain volatile for a short while more and further pullbacks cannot be ruled out as investors come to terms with the latest restrictions.

However, with the broadly improving global macro backdrop and ample liquidity, the Singapore bourse should regain its footing and resume its uptrend in due course. The Singapore stock market stands out in Southeast Asia as it can offer attractive dividend yield opportunities. It also has a fairly big representation of cyclical and value stocks which stand to benefit from the improving global economic outlook and the re-opening of the local economy, once infections fall and stabilise.

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