DBS sees STI trading sideways after April rebound stalls

The index is forecast to trade within a range, with support at 3,700 and 3,635, and resistance at 3,820 and 3,865.

Singapore’s equity market is expected to lose momentum after a strong rebound in April, as tariff tensions, slower global growth, and earnings risks cloud the outlook.

According to DBS Group Research’s Singapore Market Focus report, “the STI’s 13% rebound from its April low is stalling and is likely to turn sideways pending more clarity.”

The index is forecast to trade within a range, with support at 3,700 and 3,635, and resistance at 3,820 and 3,865.

DBS downgraded its 2025 GDP forecast for Singapore to 2% from 2.8%, citing both direct and indirect impacts from U.S. tariffs.

“Growth will slow due to 1) direct US tariffs... and 2) indirect impact from slower global growth and trade,” the report stated.

With Singapore’s economy highly exposed to external demand, the analysts warned, “Singapore GDP is highly sensitive to global business cycle, with >1% moderation for every 1% slowdown in global growth.”

The report outlined three scenarios for the remainder of the year. In the base case (55% probability), US-China tariffs are reduced but remain elevated, Singapore grows 2%, and the STI ends the year at 3,855.

The bear case (25%) foresees worsening trade tensions, a U.S. stagflation scenario, and a possible recession in Singapore, pushing the STI down to 3,020. In the most optimistic outcome (20%), significant tariff rollbacks lift sentiment and growth, raising the STI to 4,080.

DBS estimates the Straits Times Index (STI) could see earnings cuts of 3.2% in FY25F and 4.9% in FY26F due to tariff effects.

The industrials and tech sectors are most exposed, whilst REITs and consumer staples are more insulated. “Industrials (e.g., SIA) and technology (e.g., Venture) are most vulnerable... while consumer staples (e.g., DFI) and REITs are relatively shielded,” the analysts wrote.

Given this backdrop, DBS is advising investors to take profits on five STI stocks that have rallied and now offer limited upside: Singtel, SGX, UOB, OCBC, and SIA.

“We see opportunity to take profit on five STI stocks that have done well... but now offer limited upside,” the report said.

In contrast, it recommends rotating into seven more resilient names: DFI Retail, Netlink NBN Trust, Sembcorp Industries, Keppel, ComfortDelGro, UOL, and Hongkong Land.

Tariff-related volatility is also creating tactical trading opportunities. DBS highlights five stocks to watch amid fluid news flows: HPH Trust (US-China exposure), SIA and UOB (ASEAN trade risk), and tech players Venture and AEM (sector-specific tariff sensitivity).

“Fluid tariff-related news flow and stock market volatility... create bi-directional trading opportunities,” the report noted.

Despite global uncertainties, Singapore has held its ground as a relative safe haven. “Singapore equities have benefited as a safe haven for investors since Trump’s election win,” DBS said, with the STI outperforming both the S&P 500 and most regional peers since November 2024.

However, the bank cautioned, “A temporary easing of tariff-related news does not eliminate the underlying risks.”