The STI falls 3.5%, its second big drop in two days. DBS, OCBC and UOB lead a rout driven by inflation and rate fears
Oil's climb and signs of more US rate rises unsettled markets across Asia. Singapore's index has lost about 5 per cent since Tuesday's close.
Singapore shares had their worst day in a long while on Thursday. The Straits Times Index closed at 5,412.96, down 3.49 per cent, and the Business Times reported that the three local banks led the fall. It came a day after a 1.6 per cent drop led by OCBC and UOB, so the index has now lost close to 5 per cent in two sessions. The selling began at the open: BusinessToday reported that the STI fell 1.22 per cent to 5,539.75 in the first minutes, with DBS down 2.32 per cent at S$75.69. By late morning the Business Times said a rout in the banks and other blue chips had cut more than 2 per cent from the index and wiped billions of dollars off their value.
The Business Times put the cause plainly: inflation and interest-rate concerns spooked investors. Two things fed them overnight. The minutes of the US Federal Reserve's September meeting, released early on Thursday Singapore time, showed that most officials expected another rate rise to be appropriate by the end of the year. And oil prices rose again. The Business Times reported that oil climbed on concern over Middle East supply and on a report that President Trump may order strikes on Iran before the US midterm elections, and that attacks on tankers near the Strait of Hormuz had reached their highest weekly level since the Iran war began.
The pressure was regional. The Business Times reported that Japanese and South Korean shares fell as Asian stocks dropped on inflation fears, and CNA said Asian bonds were swamped by a wave of AI-related debt. In Europe, bank shares fell to a three-month low. Gold, which usually gains in times of stress, was near a nine-week low because higher interest rates make it less attractive. In the evening, Wall Street opened lower as the jump in oil and high bond yields fed inflation concerns, the Business Times reported.
Why the banks? They are the largest stocks in the STI, and they are the most exposed to a change in the interest-rate outlook. Higher rates can lift their lending margins, but a sharp rise in borrowing costs raises the risk that companies and households fall behind on loans, and it cuts the value of bonds that banks hold. Foreign funds that own large stakes in the banks can sell them quickly when they reduce their exposure to Asia.
There was no sign of trouble inside any of the banks themselves; the moves tracked global markets. For retail investors, two days like this test nerves more than fundamentals. DailyDrop will watch whether foreign selling continues on Friday, what the next US inflation figures show, and how MAS describes the risks in its policy statement later this month.