STI closes with 0.7% loss

The index is set for another negative opening following the continued retreat on Wall Street and the poor Nikkei start.

OCBC Investment Research said:

The continued retreat on Wall Street overnight and the poor Nikkei start (down 0.4% now) are likely to cue the local market to another negative opening this morning.

As a recap, the STI was already hit with a knee-jerk downside reaction yesterday; the index gapped down nearly 0.9% at the open and ended with a 0.7% loss.

And with today's tone likely remain pessimistic, we could see the index testing the 3040 key resistance-turned-support once again. A break below could send the index back to the 3000 psychological support.

On the upside, the immediate obstacle is now pegged at the 3066 level (upper limit of gap zone), followed by the subsequent key obstacle at the 3090 key peaks.

IG Markets Singapore meanwhile noted:

Yesterday’s fall in Singapore’s Industrial Production, with the key electronic sector continuing to struggle, increases the odds that Singapore will enter a technical recession in the third quarter. This shows that the local economy also has much to contend with in the current global slowdown.

Turning to the local share market, the takeover of F&N still remains in the news. As we head towards the F&N EGM tomorrow the Thai consortium has announced it will block F&N's planned capital reduction. This could be another smart move by the Thais to get minority shareholder approval.

Some shareholders may be slightly put out at having to accept $8.50 a share for their cancelled shares when the Thai offer is at a higher $8.88.

They could still sell their shares in the open market at a higher price once the deal is pushed through. It could also spell good news for those shareholders sticking with F&N as the Thais could use the $4 billion war chest to fund further acquisitions for F&N and expand its portfolio.

While the smart money was on breaking F&N up and selling it off, there is an alternative option of expanding the conglomerate instead.

We are currently pricing the Singapore market to open in-line with the US moves overnight, 0.4% lower.