STI falls 4.1% as bank stocks slide: Weekly Market Recap

What a difference a week makes.

Just last month, Singapore stocks were reaching record highs. This week, the Straits Times Index fell 4.1%, with OCBC, UOB and DBS leading the declines.

With such a sharp pullback, one question I've been hearing is whether this presents an opportunity to buy, or whether we should be more cautious.

For me, the answer starts with understanding why we're investing in the first place. This is where I'd go back to our Four Pots of Wealth framework.

For my Growth Pot, where I focus on diversified investments that can compound over the long term, a market correction does not necessarily change my approach. I would continue investing regularly through dollar cost averaging, rather than trying to time the market.

My Opportunity Pot is different. When investing in individual stocks, I would be more selective about when to buy and how much to invest. After all, just because a stock has fallen does not necessarily mean it is now an attractive opportunity.

Both Pots have a role to play in helping me build wealth for the future, but they call for different approaches, especially when markets are volatile.

This week, we looked at what is driving the STI pullback and what investors should consider. We also took a closer look at why DBS, OCBC and UOB shares have fallen, and the key factors to watch.

In Beansprout Pro, we went a step further to discuss what we would do with Singapore banks after the correction, and what would change our view.

Meanwhile, higher bond yields are also creating more options for investors looking to earn a return on their cash.

The latest 6-month T-bill yield came in at 1.90%. We also looked at what to expect from the upcoming 1-year T-bill auction on 15 October and which savings accounts have raised their interest rates.

With rates changing across different savings options, we compared the latest T-bill yields, fixed deposit rates and Singapore Savings Bonds to see where investors can earn more interest on their cash.

With the big movements in the bond market, we also published a beginner's guide to bond investing for those looking to understand how bonds work and what drives their returns.

Ultimately, I believe investing isn't about getting every market decision right. It's about making decisions that, over time, bring us closer to the life we want to live.

And when markets get volatile, remembering what we're investing for can help us stay focused on what really matters.

Happy growing!

Gerald, Founder of Beansprout

⏰ This Week In Markets

📊 Singapore stocks declined while US stocks reached new highs

What happened? 

US Treasury yields surged to their highest levels since 2002 this week. The 10-year US Treasury yield climbed to as high as 5.36%, while the 30-year Treasury yield reached 5.73%.

The sharp increase was driven by concerns over persistent inflation, elevated oil prices and rising US government debt.

However, yields retreated slightly towards the end of the week following strong investor demand at US Treasury auctions.

What does this mean?

Higher bond yields can put pressure on equity valuations, as investors demand higher returns from stocks when government bonds offer more attractive yields.

These concerns, alongside profit-taking following the strong performance of Singapore stocks, contributed to the sharp market pullback this week.

Why should I care?

The Straits Times Index fell 4.1% this week, led by sharp declines in the three Singapore banks.

OCBC’s share price saw the largest decline of 8.4%, followed by UOB’s share price, which fell 7.3%, and DBS’ share price, which declined 5.0%.

With the three banks accounting for a significant portion of the STI, their sharp declines weighed heavily on the broader Singapore market.

In contrast, US stocks edged higher this week, with the S&P 500 and Nasdaq reaching fresh record highs.

The S&P 500 rose 1.2% for the week, while the Nasdaq Composite gained 0.6%, as the AI trade continued to support technology stocks.

🚗  Moving This Week

• StarHub has announced the acquisition of MyRepublic’s mobile business, adding 85,000 active users and potentially S$2.4 million in earnings. The deal represents a small step towards consolidation in Singapore’s mobile industry, as discussions over Keppel’s sale of M1 continue following the collapse of its S$1.43 billion deal with Simba. Read more here
• NTT DC REIT is proposing changes to its management fee structure to better align the manager’s incentives with unitholder returns by linking performance fees to DPU growth. Under the proposal, performance fees will be 0.1% of deposited property value if annual DPU growth exceeds 3% but remains below 5%, rising to 0.2% if growth reaches at least 5%. Read more here 
• Far East Orchard will acquire a 42% stake in the managers of Far East Hospitality Trust from Far East Organization for S$28 million, valuing the stake at 14 times earnings. The transaction will increase Far East Orchard’s ownership of FEHT’s managers from 33% to 75%, while it will also receive a 3% stake in FEHT. Read more here

Source: Bloomberg, CNBC, Business Times, Edge Singapore

💡 The Big Important Story

Why DBS, OCBC and UOB shares are falling and what investors should watch next

Singapore bank stocks have pulled back after a strong rally. We look at DBS, OCBC and UOB, the risks to bank earnings, and what investors should watch.

🤓 What we're looking out for next week

Key dates

• Monday, 12 Oct: US Bond market closed
• Wednesday, 14 Oct: US CPI (Sep), SG GDP flash (3Q), MAS monetary policy
• Thursday, 15 Oct: US PPI (Sep), UMS ex-dividend, AIMS APAC REIT earnings, 1-year T-bill auction

Get the full list of stocks with upcoming earnings and upcoming dividends. 

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