STI’s 7% drop from high opens buying window, DBS says

Third-quarter earnings season could pull investor interest beyond bank stocks into other sectors.

The Straits Times Index (STI) has fallen 7% from its year-to-date high, which opens a buying opportunity ahead of the historically strong November-to-February period, according to a DBS Insights Direct report.

DBS expects broad-based earnings growth in the upcoming third-quarter (Q3) results season to support a shift in investor interest beyond bank stocks and into other sectors.

The report noted that the US midterm elections could trigger near-term market volatility, with potential indirect impact on Singapore stocks mainly through movements in bond yields and oil prices.

However, stronger economic growth, moderate valuations, and the ongoing US-China trade truce could help prevent a repeat of the 2018 market sell-off, DBS added.

DBS identified 5,240 to 5,150 as key support levels for the STI, where buying opportunities could emerge.

It also highlighted five growth-at-reasonable-yield (GARY) stocks that could benefit from a broader market rally, based on their earnings growth and attractive dividend yields.

The top five GARY picks were YZJ Shipbuilding, First Resources, Venture, Singtel, and UOB Kay Hian, offering exposure to shipbuilding, palm oil, technology, telecommunications, and Singapore's equity market recovery, respectively.

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