Renewed volatility in China and Hong Kong on Monday and worries of a US rate hike possibly as early as next week ensured that the local stock market kicked off the week on a down note. The Straits Times Index dropped 34.5 points or 1.2 per cent to 2,921.44.Turnover was a moderate 1.3 billion units worth S$1.4 billion of which S$1.05 billion was done in the 30 STI components and excluding warrants, the advance-decline score was 177-270. For the month, the index fell 281 points or about 8.8 per cent.
Apart from large swings in North Asia, it was also likely that added incentive to sell - or go short - came from indications that a September US interest rate hike which last week was thought to be unlikely was now back on the cards.
The reason for thinking this was comments made by US Federal Reserve vice-chair Stanley Fisher who over the weekend said at the Jackson Hole retreat "there is good reason to believe that inflation will move higher as the forces holding down inflation dissipate further".
At 5pm local time, the futures contract on the Dow Jones Industrial Average had lost almost 200 points.
Overall, brokers were not too surprised at the fall as last week's bounce was more likely short-covering after the massive losses suffered a fortnight ago. "Sentiment is very weak and fragile, so anything is possible," said a dealer.
Another said "with the FOMC meeting next week and non-farm payrolls this Friday, nobody wants to do anything".
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