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-- 331.000 Singapore Stocks Hit 17-Year Highs, Led by Soaring Bank Shares
Supported by the Federal Reserve's interest rate cut, Asia-Pacific stock markets experienced broad gains on Monday. Singapore's three major banks delivered strong performances: $DBS (D05.SG)$ led the pack with a 1.18% increase to S$39.46, edging closer to the psychologically significant S$40 mark, and marking a year-to-date gain of 36.79%. $UOB (U11.SG)$ rose by 0.94%, while $OCBC Bank (O39.SG)$ climbed 1.1%.
The $FTSE Singapore Straits Time Index (.STI.SG)$ closed yesterday at 3,638.54 points, up 0.38%, continuing the upward momentum from last week and reaching a 17-year high since 2007. Since hitting a low in early August, the index has surged over 14%.
Reasons Behind the Market Movement
Analysts have pointed out that the STI's upward trend is primarily driven by bank stocks, which have attracted significant capital inflows. Investors are increasingly viewing the Singapore stock market as a safe haven amid global economic uncertainties, especially following the onset of the Federal Reserve's rate cut cycle. Additionally, the high dividend yields in the Singapore market make it more appealing to investors.
Lin Zhilin, an analyst at Phillip Nova, noted that with the U.S. dollar weakening, central banks in Asia can adopt a more flexible approach to monetary policy and lower interest rates without the immediate concern of currency depreciation. Interest-sensitive sectors such as REITs and financials may have further upside potential, while consumer stocks are also expected to perform well.
The outlook for bank dividends is another driving force for the local stock market. Analysts have indicated that while declining interest rates may reduce banks' net interest margins, Singapore's three major banks are shifting their focus towards non-interest income(NII) as an alternative revenue source.
Market Outlook
RHB Singapore's research analysts stated, "Given the potential market volatility ahead, particularly with the upcoming U.S. presidential election, investors may seek stocks with attractive dividend yields and defensive qualities as safe havens. We believe Singapore's banks possess these qualities."
Zeng Dejun, portfolio manager at FSMOne Singapore, pointed out that the Federal Reserve's decision to cut rates by 50 basis points last week was largely in line with expectations. Additionally, broader economic recovery in sectors such as manufacturing may boost investor sentiment, leading to increased capital inflows into the local stock market.
An analyst from Macquarie Research noted that Singapore stocks can weather volatility amid market turmoil from the U.S. election. With just two months until the U.S. presidential election, Macquarie Research anticipates significant turbulence in global markets during this period. They view Singapore's stock market as resilient against downturns within the Southeast Asian region.
In a report, Macquarie's ASEAN equity research head Jaden Vandrakis and analyst Arijegah highlighted that Singapore's stock exchange has shown stable growth during past U.S. presidential elections, indicating its robustness in times of market fluctuations. They also noted that sectors like telecommunications, technology, and banking are attracting the most investor interest.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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