• A surprise US Jan wage growth report on Friday night, followed by an algorithm-driven systematic sell-off on Monday night saw the Dow Jones decline 6.4% in SGD terms over two sessions. On Tuesday night the Dow Jones recovered 2.4% in SGD terms.

• Following suit on the Monday and Tuesday sessions the regional MSCI AC Asia Pacific Index declined 4.9% while the STI declined 3.5%. One third of the STI stocks traded at 3M lows yesterday.

• The remaining 20 STI stocks are on average 7.0% off their 3M highs, with a majority of those highs made in Jan 2018. The 20 stocks include SATS, Singapore Airlines and Thai Beverage which on average declined the least, at -1.1%, over the two sessions of 5 Feb to 6 Feb.

Over the past three sessions, global equity and fixed income markets have seen a return of volatility. In some cases it has been referred to as somewhat of a normalisation to volatility which was comparatively low in 2017.

While the mode of global benchmarks was generally weak for most of last week, selling momentum picked up on the evening of Friday 2 February following a report that in the US average hourly earnings grew at the highest rate since June 2009 - at an annualised rate of 2.9%. The basic interpretation was that US employers are having to pay employees a high wage, hence creating an inflationary impact in addition to a sign of labour market tightening. The Federal Reserve this watches closely, in addition to recent ‘solid growth’ readings as drivers for higher interest rates.

The following session on Monday 5 February in the US saw selling from algorithm-driven systematic orders and trend-following strategies as discussed here. In addition, the unwinding of positions which anticipated continued low volatility contributed to the decline. Over the two sessions the Dow Jones Industrial Average declined 7.0%, or 6.4% in SGD terms. The regional MSCI AC Asia Pacific Index declined 4.9% while the Straits Times Index (STI) declined 3.5%. Last night the Dow Jones recovered 2.3% or 2.4% in SGD terms.

STI Recent Highs and Lows

One third of the STI stocks traded at three month lows yesterday. These stocks included Jardine Strategic Holdings, Singapore Telecommunications, Wilmar International, Jardine Cycle & Carriage, Ascendas REIT, CapitaLand Mall Trust, CapitaLand Commercial Trust, Yangzijiang Shipbuilding Holdings, Golden Agri-Resources and Hutchison Port Holdings Trust.

These 10 stocks are on average 12% off their respective three month highs, of which six were formed in November, two in December and two in January. Hutchison Port Holdings Trust has declined the most from its three month high while CapitaLand Mall Trust and Jardine Cycle & Carriage have declined the least.

The remaining two-thirds of the STI stocks did not revisit three month lows. The three STI stocks that were last impacted by the two days of volatility were SATS, Singapore Airlines and Thai Beverage PCL. The sum of declines for these three stocks over the two sessions of 5 February to 6 February was -0.5% for SATS, -1.2% for Singapore Airlines and -1.6% for Thai Beverage PCL. Thai Beverage PCL is the largest capitalised stock of the more defensive Consumer Staples Sector, while SATS and Singapore Airlines are a part of the Industrials Sector, which was the least performing of the Cyclical Sectors in 2017.

The three STI stocks that lost the most ground over the two sessions were Golden Agri-Resources, Yangzijiang Shipbuilding Holdings and Keppel Corp. The sum of declines for these three stocks over the two sessions of 5 to 6 February was -6.6% for Golden Agri-Resources, -6.5% for Yangzijiang Shipbuilding Holdings and -6.0% for Keppel Corp. These three stocks have averaged a 2.9% price gain in the 2018 year through to the 6 February close, following an average price gain of 32.5% in 2017.

Price changes for the two sessions of 5 February to 6 February, in addition to 3 month highs and lows are tabled below. To see more details on each STI stock click on the stock name to see its profile in SGX StockFacts.

* SGD equivalents shown for Jardine Matheson Hldgs, Jardine Strategic Hldgs, Hongkong Land Holding, Hutchison Port Hldgs Trust traded in USD.
Source: SGX StockFacts & Bloomberg (Data as 6 February 2018).

* SGD equivalents shown for Jardine Matheson Hldgs, Jardine Strategic Hldgs, Hongkong Land Holding, Hutchison Port Hldgs Trust traded in USD.
Source: SGX StockFacts & Bloomberg (Data as 6 February 2018).