Aftershocks of sell-off not over even as many markets recover

While stock rout raises possibility of earlier Fed rate cuts, strategists call for caution

- Ven Sreenivasan

Margin calls pushed the Singapore market further south on Aug 6 even as most other Asian markets staged a recovery from the previous day's bloodletting.

The Straits Times Index closed down 1.4 per cent at 3,198.44, extending a 4.1 per cent plunge on Aug 5.

Like the previous day, banks led losses with DBS Bank down 1.6 per cent at $32.75 and UOB shedding 1.7 per cent to $29.58 while OCBC Bank dropped 1.3 per cent to $13.84, hit by markets now expecting bigger rate cuts from the US Federal Reserve.

Japan's Nikkei led the regional recovery, rebounding 10.2 per cent after a record 12 per cent dive a day earlier.

Australia's S&P/ASX200 rose 0.4 per cent, South Korea's Kospi gained 3.3 per cent, but Hong Kong's Hang Seng slipped 0.3 per cent while the Shanghai Composite Index edged up 0.2 per cent.

So is this a good time to start bottom fishing? Brokers here said that following the Aug 5 market rout which globally wiped out trillions of dollars of wealth in a single day many investors were now being called up to top up their margin accounts, where stocks are bought with borrowed money.

"It will be a few more bear days before things stabilise," said the head of a dealing team at a Singapore stockbroking house.

Markets across the world dived on Aug 5 on fears of a US-led recession following disappointing economic data last week. Precipitating this was a global tech rout on concerns that the biggest-spending tech giants had little to show yet for their artificial intelligence (AI) investments.

Pressure mounted further when the Bank of Japan (BOJ) unexpectedly boosted interest rates for a second time, raising the spectre of a potential fall in Japanese imports that will impact the Japanese economy. This drove Japan's Nikkei index to its worst day since the 1987 "Black Monday" crash on Wall Street.