Including the 2.2% loss on April 9, the STI has shed a total of 14.8% in the last eight trading sessions, although the STI surged by some 243 points to 3,637.21 points when markets opened on April 10. The optimism is attributed to Trump’s 90-day pause for higher tariffs on 56 nations.
In the sea of red on April 9, the Singapore Exchange (SGX) stood out as a perceived beneficiary of the heavier-than-average trading volume on the local bourse.
Several component stocks on the STI saw trading volumes of around five to six times more compared to the average six-month trading volume.
Singapore banks play ‘pivotal role’; buy blue chips
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With several factors including the possibility of a full-blown global trade war, a recession and with the expectation of more rate cuts by the US Federal Reserve (US Fed) this year, Lee is recommending investors take a closer look at quality stocks for better entry or re-entry levels, even if it is challenging to see the bottom.
The Singapore banking sector is one to look at, for the share price corrections have brought their valuations to “more attractive levels.” The banks play pivotal roles and account for almost 50% of the market capitalisation of the STI, Lee notes.
“Based on DBS’s dividend per share of $3, this translates to a dividend yield of 8.1% based on the closing price of $37.16 (on April 9). For United Overseas Bank (UOB), the yield is 5.8% based on the FY2024 base dividend of $1.80 and share price of $30.99 on April 9,” she writes in her April 10 report.
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“In terms of P/B, DBS is at 1.5 times versus the average of 1.8 times since the start of 2025 and UOB is at 1.1 times versus the average of 1.3 times since the start of the year,” she adds.
In addition to attractive dividend yields, the banks’ shares will find price support from share buyback programmes, Lee continues.
Singapore blue chips, which have well-established track records, good dividend yields of around 6.4%, P/E ratios of 12 times and P/B ratios of 1.1 times compared to the 10-year average of 4.5%, 12.6 times and 1.2 times respectively, offer “less volatile value stocks which are better positioned to weather this trade storm”.
STI could reach 2,915 points
With the assumption that there is a 15% decline in earnings estimates and a P/E multiple of 11.1 times, one standard deviation (s.d.) below the 10-year average of 12.6 times, Lee estimates that the STI could reach 2,915 points, which is near the recent low seen in October 2022. The 3,000-point mark will be a “key support level” for the index.
That said, Lee believes that the STI is still worth entering. “Based on past events, markets tend to recover within one to two years after a sharp correction. During the Global Financial Crisis (GFC), the STI recovered 70% within a year (from the low in October 2008) after losing 23.6% in the month of October 2008,” she says.
“Similarly, the STI fell 17.6% in March 2020, but recovered 22% within a year or 42% in two years. Short-term volatility is likely to remain, but fundamentals will provide some support over the longer term,” she adds.
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Uncertainty remains
Despite the rebound in the markets, uncertainty remains with the situation still “quite fluid”, says Lee.
“The US and China trade war has not been resolved. As of now, it is 125% duties on Chinese goods and 84% duties on US goods. This situation seems unlikely to be resolved soon, unless both parties meet at the negotiation table,” she writes in response to The Edge Singapore’s queries.
“Without negotiations, these duties will have wide-ranging impact on both economies, and ultimately will reverberate to the rest of the world,” she adds, reiterating that a “recessionary scenario” cannot be completely ruled out. Furthermore, lower consumer demand, more expensive goods, jobs cuts, and declining wealth are some highly likely outcomes.
To this end, short-term investors will need to “watch market actions and developments very closely” while longer-term investors should look out for quality stocks for cheap.
“Due to the complex and unpredictable outcomes of the current trade war, investors should look at value and quality stocks in more defensive sectors, especially companies with strong cash positions, long and well-established track records, or companies that are well-positioned to participate in longer-term structural themes and trends,” says Lee.
The analyst has an “overweight” call on the Singapore market mainly from the current undemanding valuations as well as the more defensive nature of the blue chips listed on the Singapore bourse.
