KUALA LUMPUR (Nikkei Markets) — Singapore shares fell Monday amid drop in banks and Malaysia too edged lower as slump in Chinese markets and concerns over rising U.S. interest rates weighed on investors sentiment across Asia.
The Straits Times Index ended 0.9% lower at 3,181.45, while the FBM KLCI closed down 0.1% at 1775.75. DBS Group Holdings retreated 1.2% to drag Singaporean banks down. Press Metal Aluminium Holdings was the biggest index loser in Malaysia after tumbling 3%.
“Market sentiment is depressed by the surging 10-year U.S. treasury yield,” said CMC Markets Analyst Margaret Yang. “This flagged risks of rising mortgage and loan costs, and probably more rate hikes ahead.”
Most markets in Asia were lower with the Nikkei Asia300 Index falling 1.2% as mainland Chinese markets reopened after a week-long National Day holiday. The bluechip CSI300 Index tumbled 3.6%, while the Shanghai Composite declined 3%.
The losses came amid lingering pressure on regional equity markets after a clutch of robust U.S. economic data propelled the yield on 10-year Treasury bonds to seven-year highs, reflecting bets that the Federal Reserve will continue raising interest rates.
On Sunday, the People’s Bank of China cut the reserve requirements ratio for most banks by 100 basis points, with effect from Oct. 15. The move, the central bank’s fourth this year, is expected to inject funds into the financial system and spur growth amid ongoing trade spat with the U.S.
Elevated valuation is holding down the KLCI, said Value Partners Group Chairman Cheah Cheng Hye. Chinese shares, trading at 11.5 times their 2018 earnings, are “quite cheap” while Malaysian index is “expensive” at about 17 times 2018’s earnings multiple, he said.
In Malaysia, construction stocks plunged to its lowest in nearly a decade after the government terminated a contract awarded to MMC and Gamuda for the underground portion of the so-called MRT2 project. Gamuda plunged 24.3% to a seven-year low, while MMC fell 16.3%.
Willowglen MSC, which makes monitoring and control systems, added 3.5% after securing a contract worth 139.36 million ringgit ($33.54 million) from Syarikat Pembenaan Yeoh Tiong Lay. Oceancash Pacific rose 1.7% after securing regulatory approval for a transfer to Bursa Malaysia’s Main Market.
In Singapore, construction firm Chip Eng Seng Corp. lost 10% after seven shareholders signed a deal to sell a total 29.73% stake in the company to a sole buyer at S$1.08 per share.
Dairy Farm International Holdings edged down 2.2%. RHB Research Institute said it doesn’t expect a strong recovery in the company’s food division in the second half due to subdued growth in Hong Kong and Southeast Asia.
Offshore and marine firm Keppel Corp. ended unchanged. The company said a unit had signed two additional contracts with StoltNielsen Gas to build two small-scale LNG carriers worth around S$105 million ($75.9 million).