Singapore banks lead STI to fall 3.5% on Thursday

Singapore's stocks fell sharply on Thursday, October 8, as the benchmark Straits Times Index (STI) dropped 3.5%, or 195.48 points, to close at 5,412.96. The decline was primarily driven by losses across the country's major banking sector. United Overseas Bank (UOB) suffered the greatest setback, falling 5.2% to S$40.25, while DBS and OCBC also declined by 4.7% and 4.3% respectively.

The market-wide sell-off was influenced by two factors, according to Charu Chanana, Saxo’s chief investment strategist. On a global level, rising bond yields have made fixed-income investments more enticing compared to dividend-paying stocks, which are common in Singapore's income-focused market. Locally, there has been a surge in profit-taking due to concerns about bank earnings, which has impacted the index disproportionately, given its heavy banking focus.

Despite the recent correction, Chanana emphasized that the STI is still up 17% year-to-date, meaning the market is merely retracing a significant rally, rather than indicating a fundamental downside. Moreover, she pointed out that strong performance can limit upside potential as valuations may have less room for improvement, particularly if earnings expectations are revised downward.

Among the top gainers of the session, Jardine Matheson led with a 1.1% increase to US$56.56. In the iEdge Singapore Next 50 Index, Top Glove emerged as the strongest performer, climbing 3.8% to S$0.275, while First Resources faced the steepest decline, falling 6.1% to S$4.29. Overall, 1.7 billion securities worth S$4.2 billion changed hands across the broader market, with Clearbridge being the most actively traded stock, seeing 135.3 million shares traded.

The performance of regional indices echoed the decline in Singapore's market, with Hong Kong's Hang Seng Index falling 1.4%, Japan's Nikkei 225 dropping 1.4%, South Korea's Kospi sliding 2.6%, and Malaysia's KLCI index declining 0.7%.