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Banking stocks drag Singapore equities lower, Malaysia shares post gains

Singapore banks fall as U.S. yields tumble amid safe-haven demand

SINGAPORE (Nikkei Markets) -- Singapore shares fell Wednesday, led by losses in banking stocks after U.S. and local bond yields tumbled.

Malaysian equities edged higher ahead of Thursday's monetary policy review.

Most Asian markets declined Wednesday, tracking overnight losses on Wall Street. The S&P 500 lost 0.8%, its worst session in three-weeks, as markets reacted to North Korea's nuclear test over the weekend. The U.S. markets were shut Monday. Also weighing on investors was the disappointing July durable goods orders and factory orders data in the world's largest economy.

The tensions surrounding North Korea have damped demand for Asian assets, and concerns are unlikely to ease immediately after U.S. President Donald Trump posted a Twitter message on Tuesday that he is "allowing Japan & South Korea to buy a substantially increased amount of highly sophisticated military equipment from the United States."

"Against the current backdrop, safe-haven assets will continue to do well, and Asian markets may have further downside to explore," said Jingyi Pan, a market strategist at Melbourne-based broker IG. "The U.S. markets faced immense pressure from multiple sources."

Investors' preference for safety sent the U.S. 10 year bond yield to its lowest level in 10-months. Singapore bonds followed suit, dropping near their lowest level since last November. As the city-state's monetary policy is centered on exchange rate, Singapore interest rates are heavily influenced by those of the U.S.

Singapore's FTSE Straits Times Index declined 0.6% to 3,232.47. Banks were the biggest contributors by points to the losses, as falling bond yields weigh on their net interest margins. Oversea-Chinese Banking Corp., DBS Group Holdings and United Overseas Bank dropped at least 1% each.

Out of the 30 stocks on the STI, only five closed in positive territory.

CapitaLand declined 1.3%. The company is investing S$74.3 million ($55 million) in a 192-unit serviced residence in Jakarta through its wholly owned unit The Ascott, it said Wednesday.

Wilmar International fell 0.6%. Its unit acquired stake in Three-A (Qinhuangdao) Food Industries for 5 million yuan ($0.8 million).

Private sector economists kept their economic growth outlook for Singapore unchanged at 2.5% in 2017 despite a stronger-than-expected increase in the second-quarter gross domestic product, a survey by Singapore's central bank released on Wednesday showed.

The FTSE Bursa Malaysia KLCI rose 0.2% to 1,772.48, led by financial companies. Hong Leong Financial Group added 1.3%, and AMMB Holdings and Malayan Banking advanced at least 0.5% each.

At Thursday's policy review, Bank Negara Malaysia will likely keep the overnight policy rate unchanged at 3%, according to a median estimate of nine economists polled by Nikkei Markets.

Axiata Group declined 1.2%, as the mobile operator pared Tuesday's gains caused by stock upgrades by at least two brokerages.

Vizione Holdings advanced 3.9% after the construction company said it expects revenues to double in the fiscal year ending May 31, 2018, helped by its proposed acquisition of Wira Syukur (M). Shareholders earlier Wednesday approved Vizione's plan to buy Wira Syukur for 280 million ringgit ($65.6 million) in a related party transaction.

In economic data, Malaysia's July exports rose 30.9% from a year earlier thanks to stronger shipments of electronics and electrical products to China, official data showed Wednesday. Imports, meanwhile, increased 1.8% from a year earlier. The trade surplus stood at 8.0 billion ringgit in July, down 18.8% on month.

Also on Wednesday, Malaysia's central bank said gross international reserves rose to $100.5 billion as on Aug. 30, from $100.4 billion as at Aug. 15.

The ringgit was up 0.5% at 4.2516 against the dollar.

--Nimesh Vora and Kevin Lim

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