OCBC loses about S$8 billion in market value in a day. Bank shares drag the STI down 1.6%
OCBC fell 5.8 per cent in heavy trade and UOB also led the index lower. Analysts split on whether the sell-off is a warning or a chance to buy, and no single trigger has been confirmed.
Singapore's banks had their worst day in some time on Wednesday. The Business Times reported that OCBC shares slid 5.8 per cent in heavy trading, wiping about S$8 billion off the bank's market value, and that OCBC and UOB led the Straits Times Index to a 1.6 per cent fall. The STI ended at about 5,608, its lowest level of the month, after two days of gains. The Straits Times ran a guide for readers on the same afternoon asking whether the drop in DBS, OCBC and UOB shares makes this a good time to buy.
What set off the selling is not clear from the reports we could check. Neither outlet attributed the fall to an announcement by the banks, and we have not found one. The backdrop is a global sell-off in bonds. Government bond yields have climbed in the United States, Japan and Europe for weeks, and oil prices have risen with the war involving Iran. Higher yields can help banks earn more on loans, but they also raise the risk of bad debts and cut the value of the bonds banks hold. On the same day MAS answered a question in Parliament on the impact of sustained increases in US Treasury yields, a sign that the issue is on lawmakers' minds.
Analysts were divided. The Business Times reported that analysts were cautious on the banks after OCBC's fall, while RHB said it remained optimistic about Singapore banks. The three local banks are the heaviest weights in the STI, so when they move together the index follows. They are also among the most widely held shares by retail investors, many of whom own them for their dividends.
The fall undid the week's gains in one session. The STI had closed at 5,634.82 last Friday, rose 0.5 per cent on Monday to 5,664.33 and added about 0.7 per cent on Tuesday as Wall Street climbed. Wednesday's drop took it below Friday's level. The Singapore dollar also weakened slightly, with the US dollar ending at about S$1.280, up 0.2 per cent on the day.
The sell-off was not limited to banks. Jardine Matheson's South-east Asian unit fell 7.7 per cent after Macquarie downgraded it to underperform, the Business Times reported. Across the region, the mood was cautious ahead of the minutes of the US Federal Reserve's September meeting, due early on Thursday morning, Singapore time.
For long-term holders, a single day's fall changes little about the banks' earnings or dividends, which will be tested when they report quarterly results. What would matter more is evidence that rising rates are hurting borrowers. DailyDrop will watch whether the selling continues on Thursday, what the Fed's minutes say, and whether any bank or analyst names a specific cause.