Monthly wrap for February 2022: Upward momentum stalled because of Russia’s attack on Ukraine

Date: March 1, 2022

  • The STI first shot up 6% in Feb but closed with net 0.2% loss
  • Main reason was Russia’s attack on Ukraine
  • Commodity, oil prices surged; investors moved money to safe havens
  • Will the Fed ease back on its tightening because of market turbulence?
  • Singapore’s market cap up 0.3% at S$860.2b
  • DBS was ordered to set aside S$930m in additional capital
  • SPH to convene Cuscaden scheme meeting on 22 March

The STI first gained 6% in Feb, but closed with a net loss of 0.2%

Over the course of a turbulent month, the Straits Times first gained 192 points or almost 6% when it closed at 3,441.57 on the 17th, only to be hit by selling after Russia invaded Ukraine on the 24th of the month.

The outcome was that not only did the index lose its grip on the 3,400 level, it also fell below 3,300 to end at 3,242.24, a nett loss of 7 points or 0.2% for the month.

The attack on Ukraine has rocked global markets and sent investors scrambling for safety.

“Global markets are experiencing heightened volatility as investors weigh the impact of Russia’s invasion of Ukraine, potential disruptions in the flow of commodities, and the ramping up of Western sanctions on Russia,” wrote Mark Haefele, chief investment officer of global wealth management at UBS.

Markets weighing sanctions on Russia

Over the weekend, the U.S. moved to cut off Russian banks’ access from the SWIFT international payment system, making it difficult for Russian banks to transact overseas. However, the move also puts other banks and companies around the globe at risk.

Oil, commodity prices surged

Crude prices surged Monday amid fears that already-tight global oil supplies could be made worse by new financial sanctions on Russia over its invasion of Ukraine.

Futures contracts for international oil benchmark Brent rose 5% to $99 a barrel, with futures for U.S. benchmark West Texas Intermediate crude up 5% to near $96.50. Oil prices remained below their highs seen at the peak of the market frenzy late last week, when U.S. crude briefly topped $100 a barrel for the first time since 2014 before slipping back.

Investors sought safety in bonds, gold

Investors largely moved into safe assets on Monday to ride out the volatility in the stock market. The price of the 10-year Treasury bond rose, sending its yield down to 1.83% from a closing level of 1.97% on Friday. The price of gold rose 1.3%.

Will the US Fed cut back on its rate hikes?

Interestingly, some observers think that the volatility in markets might prompt the US Federal Reserve to ease back on its interest rate hikes. The probability than the Fed lift rates by 50 basis points — as opposed to 25 basis points — is now just under 7% as per the federal funds futures market, compared to the 24% chance on Friday.

Singapore’s market cap for Feb up 0.3% to S$860.2b

The month started with a bang, with the STI jumping 66 points or 2% after the Chinese New Year holidays in response to several consecutive all-time highs on Wall Street that were driven mainly by beter-than-expected corporate earnings. In the first week, the index gained 82 points or 2.5%.

The second week was even better, with the index rising 97 points or almost 3%. Most of the time, it was gains in the three banks which pushed the index higher.

However, the momentum stalled by the third week when the possibility of war in Ukraine emerged. By the fourth week when the attack actually took place, the momentum had reversed significantly.

Despite this loss, the total market capitalisation of the 664 companies listed here rose 0.3% from S$858b at the end of January to S$860.2b. The market cap of the 30 STI components was up 0.4% at S$536.1b.

DBS ordered to set aside S$930m in regulatory capital

As penalty for the widespread disruption of its digital banking services in November last year, DBS was ordered early in the month to set aside about S$930 million in additional regulatory capital to guard against operational risks.

SPH terminated Keppel’s agreement, to hold Cuscaden scheme meeting on 22 Mar

Singapore Press Holdings (SPH) during the month said it has decided to terminate Keppel Corp’s implementation agreement relating to the latter’s takeover offer, while pressing ahead with preparations for shareholders to vote on Cuscaden Peak’s rival offer.

This in turn prompted Keppel to file a notice of arbitration with the Singapore International Arbitration Centre (SIAC) to start arbitration proceedings against SPH.

SPH announced on Monday that it will hold a scheme meeting on 22 March to vote on Cuscaden’s takeover offer.