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Oil slump drags Singapore, Malaysia shares lower

SINGAPORE (Nikkei Markets) - Shares in Singapore fell to a seven-week low and Malaysian equities ended lower for a third day straight as a drop in global oil prices upended global risk appetite.

The S&P 500 Index suffered its biggest decline in over a month on Tuesday, led by a fall in energy stocks after benchmark U.S. crude prices slid 2.2% overnight to slip into bear territory, defined as a 20% drop from a recent peak. Weakening oil prices drove regional energy producers lower, taking the Nikkei Asia300 Index down 0.5% on Wednesday.

"Oil is at the center of the market moves," said Chris Weston, chief market strategist at IG, a Melbourne-based broker. "One would imagine central banks would be looking at the moves quite closely given the impact of falling oil on headline inflation."

Investors in Asia also digested MSCI's decision to include more than 200 yuan-denominated China shares into its Emerging Market Index, starting June next year. The move to include A-shares in the gauge for the first time will come at the expense of other country constituents, but the 73-basis-point weight allotted to the inclusion didn't rattle other Asian markets much.

"For regional markets, including the local Singapore market, the impact may be second-order and likely only be felt in the longer term. In the near-term, the inclusion could really been seen as symbolic at best with the implementation due only in 12-months," said Jingyi Pan, also from IG.

Singapore's FTSE Straits Times Index fell 0.9% to 3,201.77. Rig builder Keppel Corp. shed 1.6%, weighed by the slump in crude prices.

Property developer UOL Group on Wednesday requested a trading halt pending an announcement. UOL is associated with billionaire banker Wee Cho Yaw, whose family is the controlling shareholder of United Overseas Bank.

UOL will most likely issue an announcement on Thursday, a spokesman for the company said. UOL subsidiary United Industrial Corp. and investment holding company Haw Par also requested trading halts. UOL had fallen 1% on Tuesday, but is up 10% in June so far.

Other developers in the city-state also fell on Wednesday. City Developments dropped 1.9% and CapitaLand declined 1.4%.

Sia Engineering slid 1.2%, in line with broader market losses. The company and GE Aviation have agreed to establish a new engine overhaul joint venture based in Singapore.

The FTSE Bursa Malaysia KLCI slipped 0.3% to 1,775.57. Maxis lost 0.5% to end at 5.59 ringgit, building on Tuesday's over 4% decline following a share offering at 5.52 ringgit per share. Tenaga Nasional, down 1%, was the biggest contributor to the decline on the KLCI, according to QUICK Analytics available on N2N Connect.

Malaysia's consumer prices rose at a slower-than-expected pace of 3.9% in May, official data Wednesday showed. That compares to a median 4.0% increase predicted by seven economists in a Nikkei Markets poll and April's 4.4% year-on-year gain.

Economists said the latest data reinforce view that inflation had peaked in March when it surged to an eight-year high of 5.1% year-on-year, while relatively soft global commodity prices will help to keep a lid on the pricing pressure. "Given the modest growth trajectory, demand and pricing conditions have thus yet to firm materially for households," said Weiwen Ng, a Singapore-based economist at Australia & New Zealand Banking Group. "Consequently, we maintain the view that core inflation should remain relatively modest."

Selangor Dredging jumped 18% after saying it expects to record a 146.80-million-ringgit ($34 million) gain from the disposal of Wisma Selangor Dredging for 480 million ringgit. It also said it plans to distribute 80.96 million ringgit as special cash dividend.

Superlon Holdings rose 5.7% after the insulation-material maker reported a 72% jump in fourth-quarter profit and a 37.9% increase in revenue.

Sasbadi Holdings climbed 2.1% after saying it is planning a 1-for-2 bonus issue.

Ekovest added 2.5% after saying it received in-principle approval from the government for the proposed development of 'Kuala Lumpur River City,' a mixed development project stretching three kilometers along the Gombak River.

--Nimesh Vora and Kevin Lim

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