Bank and property counters drag STI down

Market sentiment hit by MAS' concerns over risks linked to deferred payment schemes



BANK and property stocks fell yesterday after Singapore's central bank raised questions about banks' exposure to deferred payment schemes for residential properties.

The Monetary Authority of Singapore (MAS) said banks should be careful about the higher risks associated with the increasing use of these schemes.

They basically allow a home buyer to put off paying the bulk of a new property's price until construction is finished.

'People took profits, which was the wise thing to do,' said a trader. 'If there are no deferred payments, and if it is clamped down, fewer people will buy new property developments coming up as the speculative element will be gone.'

Mr Julian Sandt, the chief executive of fund management firm Orchid Capital, suggested that yesterday's selling could be an 'overreaction' to the news.

But he accepted that the fact the MAS 'actually talked about the property market' had triggered selling. Investors could also be worried that 'cooling down measures' could be implemented, he added.

DBS Group Holdings shed 50 cents to $22.20 while United Overseas Bank (UOB) lost 50 cents to $22.10. City Developments was among the biggest losers, down $1 at $15.40, as investors shrugged off recent bullish brokerage upgrades.

The Straits Times Index (STI) suffered its biggest one-day fall - 1.4 per cent - since March 14 yesterday, just days after repeated record highs. This was in line with most regional markets which also shed recent gains on concerns over the United States' growth outlook.

Another trigger for the latest round of jitters was the overnight release of signs that the US Federal Reserve is not prepared to cut interest rates any time soon.

'At this point in time, the market thinks the US economy is going to slow down,' said UOB's head of economics, Mr Jimmy Koh. 'We'll probably see moderation, but it's not recessionary.'

Yesterday, the STI closed 47.93 points lower at 3,372.69, with 2.64 billion shares worth $2.37 billion traded. Losers edged out gainers by 378 to 373.

In a report this month, JPMorgan radically revised its end-of- year STI target to 4,000 from 3,000 previously.

It said: 'Singapore offers investors regional champions, a pro-growth monetary policy, strengthening currency and, we would argue, unappreciated domestic growth story.'