The Rebound
On Friday (20 March), the Straits Times Index (STI) ended its losing streak as it increased 4.3 per cent or 99.74 points to close at 2,410.74 points.
The STI started up 1 per cent in the morning and it continued with that momentum throughout the day on Friday. This rebound occurred as Wall Street ended its session higher following the announcement of unprecedented central bank and government measures designed to mitigate the impact of Covid-19 on the economy.
Some of the measures include the slash in interest rates and the trillion-dollar stimulus plan by both the Federal Reserve and the US government as it pumps liquidity into the economy to boost market sentiment and asset markets.
The Chief Markets Strategist at AxiCorp, Stephen Innes stated that “fiscal stimulus has been geared to shore up liquidity conditions in financial markets and for corporates.”
Even though the markets are reacting positively, Mr Innes cautioned that it may be the calm before the storm because the“nasty impact on corporate solvency will become more evident in the weeks ahead of when the demand shock filters through to the real economy.”
The Freefall
On Monday (23 March) morning, the STI dropped 181.33 points, down 7.52 per cent, following the announcement by Singapore that it is banning all short-term visitors from all countries entering the country starting from Tuesday (24 March). Visitors are also not allowed to transit through the country.
Added to this, the entry and return of work pass holders, as well as their dependents will be disallowed by the Ministry of Manpower (MOM). The country will only allow workers in essential services sectors such as transport and healthcare to enter the country.
This ban was put in place in response to the death of two Covid-19 patients in the country on Saturday (21 March). This incident worsened fears that the economy, which is very dependent on foreign workers and tourism, could be pushed into recession.
Due to the fears of a persistent Covid-19 pandemic, companies on the Singapore Exchange (SGX) had been strongly negatively impacted.
In particular, the global financial markets were not pacified by the Federal Reserve’s surprise decision on Sunday (15 March) to cut interest rates. As of now, more central banks have followed suit by slashing rates.
On Wednesday (11 March), the World Health Organisation (WHO) officially declared Covid-19 as a pandemic, which caused investors to begin fleeing for safety.
The uncertainty from Covid-19 is also compounded by uncertainties caused by geopolitical events such as the Saudi-Russia oil price war which led to the crash in oil prices on Monday (9 March).
The latest graphs on the trends of the STI can be seen here.