Singapore Stocks Slide as Fed Holds Rates, Oil Shock Weighs on Outlook

Singapore equities opened lower on Thursday as investors reacted to a hawkish Federal Reserve stance, rising oil prices, and escalating geopolitical tensions.

STI Declines as Global Sentiment Weakens

The FTSE Straits Times Index (STI) fell 1.22% to 4,941, tracking overnight losses on Wall Street where major indices dropped over 1% amid inflation concerns.

Despite broader weakness, market breadth remained relatively resilient with 431 gainers vs 200 decliners, indicating selective buying.

Fed Holds Rates but Signals Sticky Inflation

The US Federal Reserve kept its benchmark rate unchanged at 3.5%–3.75%, but reinforced a cautious stance.

Key signals include:

• Inflation expected to remain above 2% until 2028

• Only one rate cut projected for 2026

• Rising energy prices identified as a key inflation driver

Fed Chair Jerome Powell highlighted high uncertainty, noting the economic impact of the Middle East conflict remains unclear.

Oil Shock and War Risks Pressure Markets

Oil prices continue to surge amid the US-Israel-Iran conflict, raising fears of prolonged inflation.

Higher energy costs are already impacting global supply chains and corporate margins, particularly for multinational firms reliant on stable input costs.

Singapore Growth Outlook Trimmed

Singapore’s 2026 GDP forecast was revised lower to 3.4% (from 3.6%), despite non-oil domestic exports rising 6.7%.

The downgrade reflects:

• Disruptions in global commodity flows

• Pressure on the petrochemical sector, which relies on crude-based inputs

• Broader trade risks linked to geopolitical tensions

Private Banking Opportunity Emerges

Amid instability in the Middle East, ultra-high-net-worth (UHNW) capital is increasingly seeking alternative destinations.

Singapore banks such as DBS, OCBC, and UOB are well-positioned to benefit, given:

• Strong wealth management platforms

• Expertise in handling complex cross-border assets

• Singapore’s reputation as a safe financial hub

Stocks to Watch: Expansion, Infrastructure, and Repositioning

• Wing Tai acquired a freehold land parcel in Kuala Lumpur, expanding its regional property footprint

• COSCO Shipping Singapore continues development of the Jurong Island Logistics Hub, supporting long-term infrastructure growth

• Manulife REIT reported weaker earnings and maintained distribution suspension, reflecting ongoing asset challenges

• Ley Choon will transfer to the mainboard, potentially improving investor visibility

Share Buybacks Signal Selective Confidence

Recent buyback activity highlights selective corporate confidence:

• Chuan Hup Holdings and Trek 2000 showed high buyback intensity relative to daily volume

• The Hour Glass recorded over 50% buyback participation, indicating strong support at current levels

• Large caps like UOB and Keppel maintained modest buybacks

These trends suggest valuation support in select mid-cap and niche sectors, despite broader market weakness.

Investor Takeaways

• Singapore equities declined following a hawkish Fed outlook and rising oil prices.

• The Fed signalled prolonged inflation risks, limiting expectations for aggressive rate cuts.

• Singapore’s growth outlook has been revised lower, reflecting external risks.

• Private banking and wealth inflows could benefit local banks amid Middle East capital shifts.

• Buyback activity remains strong, indicating selective confidence despite market volatility.