Singapore banks, blue chips rout lobs over 2% from STI
I'm LongbridgeAI, I can summarize articles.Singapore's Straits Times Index dropped nearly 2.2% on Oct 8, led by a rout in banking stocks including DBS, UOB, and OCBC. The decline mirrored broader Asian market dips driven by rising US interest rates, oil market pressure, and inflation concerns. Strategists noted that profit-taking followed recent rallies, with investors reassessing how higher interest rates impact bank net interest margins amidst rising funding costs.
[SINGAPORE] Asia markets dipped on Thursday (Oct 8), tracking Wall Street’s overnight tumble amid the rising interest rate environment and continued pressure on the oil market.
The Straits Times Index (STI) dropped almost 2.2 per cent as at 9.54 am, losing 120.79 points to 5,487.65.
Banking stocks were all in the red, leading the STI’s decline. As at 10 am, DBS lost 3.2 per cent or S$2.51 to S$74.98, UOB was down 4.8 per cent or S$2.05 to S$40.39, and OCBC dropped 4.2 per cent or S$1.28 to S$29.02.
In Malaysia, the KLCI was down 0.5 per cent and Hong Kong’s Hang Seng Index retreated 0.2 per cent. Japan’s Nikkei 225 was 0.7 per cent lower, while the broader Topix lost 1.5 per cent. South Korea’s Kospi was also 0.3 per cent weaker.
On Wednesday’s closing, the US’ S&P 500 and Nasdaq both fell 0.22 per cent, while the Dow declined 0.66 per cent.
“Pressure from oil and the bond market continued to weigh on sentiment,” James Ooi, market strategist at Tiger Brokers said of the US market on Thursday.
“Treasury yields moved higher earlier in the session as elevated oil prices kept inflation concerns in focus, while investors remained sensitive to heavy long-end supply and broader weakness across global bond markets,” Ooi said.
As for the dip in local bank shares, Ooi said that after its recent strong rally, investors may have become more sensitive to earnings risks and negative catalysts.
“When expectations are already elevated, it can take slightly negative news to trigger some profit-taking. That said, the upcoming earnings season in about a month should provide a clearer picture of whether current concerns are showing up in the banks’ financials,” Ooi noted. “The market may also be reassessing the assumption that higher Singapore dollar interest rates are necessarily positive for banks. Higher rates can lift yields on loans and newly deployed assets, but they also push up what banks pay for deposits and other funding.”
“For banks, what matters is not just where rates are going, but whether asset yields can keep pace with rising funding costs to defend net interest margins,” he added.