DBS says STI ‘likely to turn sideways’, outlines 3 scenarios on Singapore’s growth and STI levels amid tariff talks

SINGAPORE: The Straits Times Index (STI) is “likely to turn sideways” after a 13% rebound from its April low stalled, pending more clarity, with support at 3,700 and 3,635 and resistance at 3,820 and 3,865, Singapore Business Review reported, citing DBS Group Research’s Singapore Market Focus report.

DBS also downgraded its 2025 gross domestic product (GDP) forecast for Singapore to 2% from 2.8%, amid the impact of direct US tariffs and indirect impact from slower global growth and trade, as stated in the report.

With the city-state’s trade-dependent economy, analysts warned that for every 1% slowdown in global growth, Singapore’s GDP could drop by more than 1%.

The bank outlined three possible scenarios for the rest of the year.

In the base case, with a 55% probability, US-China tariffs are reduced but remain elevated, Singapore’s economy grows by 2%, and the STI is expected to reach 3,855 by the end of the year.

In the bear case, with a 25% probability, US-China trade tensions worsen, the US economy faces stagflation, and Singapore may enter a technical recession, with the STI falling to 3,020.

Meanwhile, in the most optimistic scenario, with a 20% probability, US-China tariffs are rolled back and remain so, Singapore’s economy grows by more than 2%, and the STI ends the year at 4,080.

DBS forecasts that the STI could face earnings cuts of 3.2% in fiscal year 2025 (FY25F) and 4.9% in fiscal year 2026 (FY26F) due to the effects of tariffs, with the industrial and tech sectors being the most vulnerable, while REITs and consumer staples are seen as relatively shielded.

The report suggests that there’s an opportunity to take profits on five STI stocks that have performed well but now offer limited upside—Singtel, Singapore Exchange (SGX), United Overseas Bank Limited (UOB), Oversea-Chinese Banking Corporation Limited (OCBC), and Singapore Airlines (SIA).

It also recommended seven resilient stocks to rotate into: DFI Retail, telco Netlink NBN Trust, Sembcorp Industries, Keppel, ComfortDelGro, United Overseas Land Limited (UOL), and Hongkong Land.

In addition, DBS highlighted five stocks to watch amid tariff-related news flow swings: Hutchison Port Holdings Trust (HPHT), SIA, UOB, Venture, and AEM Holdings Limited.

Still, “Singapore equities have benefited as a safe haven for investors since Trump’s election win,” DBS said, adding caution that temporary easing of tariff-related news does not eliminate underlying risks. /TISG 

Read also: Investor confidence in S-REITs grows as Orchard Road malls hit record prices: DBS

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