Market value of Singapore stocks plunges 6.1% in October despite banks’ rally

UNITED Overseas Bank (UOB)‘s higher quarterly earnings lifted not only its share price, but also that of its two local peers’. But while the banking trio provided some support to the Straits Times Index (STI), the market capitalisation of the benchmark as well as that of the broader market, were down by as much as 6.1 per cent in October.

Investors piled into the shares of UOB, DBS and OCBC , propelling the trio into becoming the top three gainers for the month, adding between S$1.4 billion and S$2.7 billion to their market values. UOB now has a value of S$46.8 billion in terms of share price, while that of OCBC stood at S$54.8 billion and DBS, S$88.3 billion. The banks are expected to remain beneficiaries of rising interest rates.

Phillip Securities Research’s senior research analyst Terence Chua said that UOB’s 34 per cent year-on-year increase in its net profit to S$1.4 billion for the third quarter to September in results released last Friday (Oct 28), bolstered the STI. Index heavyweights DBS and OCBC also rallied as investors anticipated better profits from them.

However, the market value of the STI, at S$513.3 billion, was 2.4 per cent lower for October.

It was in line with the decline in the Singapore broader market of 644 companies, the market value of which slid 6.1 per cent over the month from S$842.7 billion to S$791 billion – a second straight month of decline.

A total of 350 counters were lower; only 139 managed to wrap up October with a higher market value.

Catalist-listed stocks performed better than mainboard-listed counters, as the smaller-cap companies’ market capitalisation at S$9.1 billion was only 1.8 per cent lower, compared to the mainboard-listed’s 6.2 per cent plunge to S$782 billion.

Most stocks, especially real estate investment trusts (Reits), continued to be held hostage by the spectre of US central bank’s interest rate hikes, although the earnings season that started in October provided counters that have reported improved financials and stemmed the slide in share prices.

Geoff Howie, market strategist at the Singapore Exchange, pointed out that ahead of the last trading session in October, the market recorded net fund outflows of close to S$100 million, largely attributed to net fund outflows of the Reit sector.

Notably, the FTSE ST Reit Index posted a 5.5 per cent decline in total return in October, with the benchmark further converging to the FTSE EPRA Nareit Developed Index, as the FTSE ST REIT Index was down 14.9 per cent for the first 10 months of 2022, compared to the global Reits benchmark’s 23.6 per cent decline in total returns.

After the announcement of the ban on cutting-edge chips and chip-making equipment by the US in early October, Singapore semiconductor-related companies’ share prices took a hit, noted Howie.

RHB Bank Singapore’s head of equity research Shekhar Jaiswal said of the real estate sector’s lacklustre performance in the aftermath of additional tightening measures: “We expect the real estate market to see some moderation in demand amid higher interest rates and tighter lending limits.”

The top decliner was insurer Prudential as its market capitalisation was down S$14.9 billion.

Notably, there were three Jardine firms among the top 10 decliners, with Jardine Matheson , Hongkong Land , and Jardine Cycle and Carriage collectively losing S$9.2 billion in market capitalisation.

Chua of Phillip Securities Research said: “There was some late selling on Monday, as markets become cautious ahead of the US Federal Reserve meeting this week, which will provide clues on the monetary policy trajectory for the rest of year.”

RHB’s Jaiswal expects Singapore equity market to continue to be volatile amid rising global macroeconomic risks. Stated the analyst: “We are in the midst of the third-quarter earnings reporting season and we believe investors will be watching the numbers closely to assess the impact of rising inflation, rising interest rates and slowing economic growth on the 2023 earnings outlook.”