A gloomy report from the United States Federal Reserve overnight had the expected fallout here and across the region yesterday.
It was a sea of red for Asia’s key stock indexes, with the Straits Times Index (STI) not spared in the carnage. The local benchmark plunged 96.36 points, or 3.44 per cent, to 2,704.21.
Losers thumped gainers 386 to 140, while 1.95 billion shares worth $2.21 billion were traded.
Elsewhere, Australia’s benchmark fell 3.05 per cent to snap a seven-session winning streak, and Japan’s Nikkei suffered its biggest one-day fall in six weeks, closing 2.82 per cent lower.
Other key losers were Hong Kong’s Hang Seng Index, off 2.27 per cent, and the FTSE Bursa Malaysia Kuala Lumpur Composite Index, down 1.14 per cent, although China’s Shanghai Composite Index got off relatively lightly, dipping 0.78 per cent.
The dismal showing by the regional bourses came after the US central bank gave a dour economic outlook the night before.
A reality check to the euphoria on share markets came in the form of the Fed’s forecast that the US economy would contract 6.5 per cent this year and unemployment would still be at 9.3 per cent by the end of the year.
Fed chairman Jerome Powell noted that the recovery would be a long road and that policy would have to be proactive, with interest rates near zero until 2022.
Said Mr Robert Carnell, ING’s regional head of research for the Asia-Pacific: “Markets might just be showing how dependent they are on incremental policy easing.”
He added: “Simply remaining ultra-loose may not be enough any more, especially when a V-shape economic or corporate earnings recovery seems an unrealistic dream.”
All but one out of the 30 STI constituents closed lower; the exception was Singapore Press Holdings, publisher of The Straits Times, which rose 0.74 per cent to $1.36.
The three local banks slipped. DBS Equity Research thinks that there will be profit taking following their recent strong run and after the Fed reiterated a lower-for-longer interest rates stance.
United Overseas Bank, which goes ex-dividend next Monday, shed 2.42 per cent to $22.54, OCBC Bank was 3.39 per cent lower at $9.40, and DBS shares slipped 3.95 per cent to $22.15.
The most heavily traded STI stock was Singtel, which declined 3 per cent to $2.57, with 55.8 million shares cum-dividend having changed hands.
• Additional reporting by Reuters
