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What Comes After A Global Sell-off?
Singapore Market Commentary | 23 February 2018
By: kendrick.loh
Articles (4) Profile

Fears of inflation and rising bond yields drove investors into a panic sell-off and set Wall Street on one of its wildest ride ever since the market turmoil in 2015. Dow Jones Industrial Average (DJIA) tumbled as much as 1,597 points in a single trading day and closed down 1,175 points at 24,345.75 on 5 February 2018, also the biggest single-day point drop in history.

The recent Fed meeting minutes put further pressure on the 10-year US Treasury sending its yield to hit a four-year high of 2.95 percent. Coupled with optimism surrounding economic growth and inflation, expectations of a rate hike at the next FOMC Meeting on 20-21 March 2018 is likely to happen.

In the midst of the US-led chaos, investors across the globe sold stocks prompting a similar sell-off. Despite the negative sentiments, Noah Weisberger, a managing director at AB Bernstein shared that for the past decades, the market will usually experience a 10 percent decline every 18 months or so as the market enters a correction phase.

In Asia, Hang Seng Index closed at 29,507.42 points – an 11 percent decline from the recent high – on 9 February after falling to as low as 29,129.26. Similarly, the Shanghai Composite Index fell to as low as 3,085.38 points before closing at 3,129.85 points on the same day – a 12.3 percent drop from the most-recent high. Japan’s Nikkei 225 lost 11.2 percent, closing at 21,154.17 on 14 February 2018.

The Straits Times Index (STI) plunged by 6 percent to close at 3,340.55 on 9 February 2018, wiping off several months of gains. However, DBS record earnings of $4.39 billion for the financial year was able to mitigate the full effect of the global market correction as its share price shot up by 10.3 percent over the fortnight to close at $29.45 on 21 February 2018. Eventually, STI closed at 3,533.22 points on 23 February.


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