The STI’s reputation as a defensive index in the region has offered limited protection amid the broader market fallout, he adds in an April 9 note. “The STI is undeniably sensitive to the performance of the banking sector, which just a few months ago, accounted for over 50% of the index’s weight.”
The recent plunge to a new low since September 2024 threatens a shift in market structure, says Yeap, with any short-term bounce facing “significant risks of fading into a lower high”.
“Perhaps greater conviction for buyers may be presented with any potential bullish divergence on its daily relative strength index (RSI) and Moving Average Convergence Divergence (MACD), where these indicators form higher lows. As of now, such a divergence has yet to materialise,” he adds.
See also: STI opens lower on April 9, slips further to 3,385.88 points
The high concentration of banking stocks leaves the index “especially sensitive” to shifts in US Federal Reserve policy, says Yeap. Investors are now pricing in four 25-basis point (bp) rate cuts through 2025, a “notably more dovish” stance compared to just a month ago.
“Any deterioration in growth conditions ahead could also create a more challenging environment for the banks, in terms of weaker loan demand, tighter net interest margins, higher credit risks and softer wealth management activities,” says Yeap.
DBS Group Holdings (DBS) has not been spared from the recent market rout, with buyers still attempting to defend the stock's close in bear market territory at the time of writing.
See also: ‘Negotiating phase’ now underway, except for China: IG
Likewise, while there are the prospects of a relief rally on near-term oversold technical conditions, any bounce may remain a corrective one, with one to watch for any lower high formation, says Yeap.
DBS’s immediate support to watch may be at the April 7 low at the $36.30 level, with any breakdown likely to unlock fresh selling pressures, he adds.
DBS Group Research downgraded United Overseas Bank (UOB) to “hold” and maintained the same rating on Oversea-Chinese Banking Corporation (OCBC) on April 8.
DBS analyst Lim Rui Wen also slashed her target prices on both banks, from $38.50 to $32.70 for UOB and from $17.60 to $14.40 for OCBC.
A day prior, UOB Kay Hian Research downgraded the Singapore banking sector to “underweight”, with a “sell” call on DBS and a “hold” call on OCBC.
Risks to drag on
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The US has implemented a 10% reciprocal tariff on Singapore — modest compared to regional peers, but the indirect consequences could be far more significant, according to Yeap.
“Being a small and open economy, Singapore’s trade-to-GDP ratio is among the highest in the world (at three times), which leaves the economy highly sensitive to disruptions in global trade,” he adds. “Any prolonged trade disruptions among major global economies may lead to a sharper decline in global trade activities, with cascading spillover effects on domestic investment, labour conditions, consumer consumption and business confidence.”
During the US-China trade war, Singapore’s NODX fell by 9.2% in 2019, reversing sharply from a 4.2% gain in 2018.
GDP growth slowed to just 0.7% — one of the weakest performances since the Global Financial Crisis.
This time round, US tariffs are broader in scope, which means that the trade bypasses that offered some cushion in 2018 may no longer be as effective, says Yeap. Reciprocal tariffs are also “exorbitantly higher” for many countries, he adds, raising the risk of a greater hit to global trade activities.
Given Trump’s “transactional” approach to trade — emphasising what each trading partner can bring to the table for the US — small, open economies like Singapore appear “particularly vulnerable” with “limited room for negotiations”, according to Yeap.
“Ahead, we see a narrow path to resolution for the ongoing tariff gridlock between the US and China as well. Given the current tone from both sides, the likelihood of further tit-for-tat actions seems to outweigh the chances of meaningful talks for now,” he adds. “Even if negotiations resume in the future, reaching a consensus may prove difficult, suggesting that trade tensions could persist for an extended period.”
Charts: IG
