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Business Times – 06/08/07
August 6, 2007, 11:19 am
Filed under: current affairs

Business Times – 06/08/07

S’pore shares plunge 3.7%

OCBC sees no big impact from CDO exposure

S’pore shares plunge 3.7%

  • Bank stocks fall due to subprime exposure concerns: the main problem is whether the exposure is substantial
  • The bigger picture involves ascertaining the effect of the subprime meltdown on Asian economies.
  • Fundamentals seem unchanged.

SINGAPORE – Singapore share prices fell 3.7 per cent on Monday as rattled investors bailed out on growing concerns over implications stemming from the troubled US sub-prime mortgage market, dealers said.

The Straits Times Index (STI) dropped 127.05 points to 3,308.99.

Volume traded totalled 2.6 billion shares worth $2.9 billion (US$1.9 billion) and there were 112 rising issues, 916 losers and 537 issues were even.

‘The key issue is whether the US sub-prime problem will spread to Asia,’ said DMG Partners dealing director Gabriel Yap.

DBS Vickers Securities said the STI was expected to weaken further, possibly to 3,240 points but market fundamentals remained intact even if the market chalked up more losses.

‘The Asian growth cycle remains intact and equity markets should resume their bull market once the current correction ends,’ it said.

All three local banks were among the losers with DBS Group Holdings down one dollar to $20.90, United Overseas Bank was off $1.30 to $19.70 and Oversea-Chinese Banking Corp dropped 45 cents to $8.25.

For the blue chips, Singapore Airlines fell 50 cents to $17.80, Singapore Telecommunications lost two cents to $3.42 while ST Engineering eased eight cents to $3.56.

Property heavyweights were also hit with City Developments down by 80 cents to $13.90, Keppel Land lost 25 cents to $7.90 and CapitaLand slipped 25 cents to $7.15. — AFP

OCBC sees no big impact from CDO exposure

Oversea-Chinese Banking Corp, Singapore’s smallest bank, does not expect any big impact from its US$430 million investments in collateralised debt obligations (CDOs), it said on Monday, as investor fears spread over a global credit crunch.

The statement by Singapore’s third-biggest bank comes after investors hammered banking stocks across Asia, fearing that the turmoil in global debt derivatives markets could hurt banks.

OCBC shares were down 5.2 per cent before the lunch break, DBS was down 5 percent while UOB had fallen 5.7 per cent, pushing the benchmark Straits Times Index down 3.69 per cent.

The statement came after DBS Group Holdings said last week it had invested US$850 million in CDOs and collateralised loan obligations, but there was no material impact on its books.

UOB, the second-biggest lender said its CDO exposure was 0.3 per cent of its assets, while UOB Asset Management declined to comment on its exposure to CDOs.

OCBC said that excluding its subsidiaries – Great Eastern Holdings and Lion Capital Management – it has US$430 million in investments in CDOs.

‘These CDOs are intended to be held to maturity, with some investments dating back to 2003,’ it said.

OCBC said it continues to monitor the portfolio closely, but added it has no intention to liquidate any of its CDOs.

It said Great Eastern Holdings, in which the bank has an 87 per cent stake, has invested $177 million (US$117 million) in CDOs, of which an estimated $28 million were in asset-backed securities, or ABS, which include US subprime mortgages.

Fund manager Lion Capital Management, which is 70 per cent-owned by Great Eastern and 30 per cent by OCBC Bank, manages $5.7 billion worth of CDOs – or 18 per cent of assets under management.

It said the CDOs are not structured as hedge funds and have not been leveraged.

‘While there has been some mark to market volatility, none of the deals has experienced any loss,’ it said.

It said there have been no losses or downgrades by ratings agencies of the CDOs held by OCBC, Great Eastern and Lion Capital.

‘The group continues to watch developments in the financial markets closely, given the spillover impact these developments may have on economies in the region,’ it said. — REUTERS

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