The STI dropped 0.7% following US rate hike, analysts expect banks to benefit

Date: September 21, 2026

• The Straits Times Index fell 39 points to 5,656.11
• As expected, the US Federal Reserve raised rates by 25 basis points
• Fed also signalled at least one more rate hike this year
• How Wall Street fared – the Dow suffered its worst week since March
• Fed hike will benefit banks: analysts
• Multi-Chem’s shares take a beating after CEO and COO interviewed by CPIB
• Retail investors were net buyers of S$888m of stocks between 4-16 Sep: SGX Research

 

US rate hike weighed on stocks

The Straits Times Index lost 39 points or 0.7% at 5,656.11 over the week, following the US Federal Reserve’s widely anticipated interest rate hike.

Daily volume between Monday and Thursday hovered between S$1.6-1.9b but spiked up to S$3.17b on Friday, thanks to heavy trading of the three banks, Singtel and ST Engineering.

Collectively, turnover in the five counters added up to S$1.3b, or 41% on the whole market’s turnover for Friday.

 

As expected, the US Federal Reserve raised interest rates

Investors have been betting the US Federal Reserve is at the start of a series of interest-rate increases. On Wednesday, Chairman Kevin Warsh gave them little reason to think otherwise.

The Fed raised rates for the first time in three years and officials pencilled in at least one more increase this year. Warsh said the quarter-point move “removed a dose of accommodation.”

In central-bank parlance, accommodation means stimulus, so the phrase suggested officials don’t think rates are restraining the economy even after lifting them.

Rates were hiked to 3.75%-4% from 3.5%-3.75% by the Federal Reserve in a unanimous decision, despite fierce opposition from President Donald Trump, who had called for rates to be cut.

Fed Chair Kevin Warsh said the move was because “inflation is too high and has been for too long”, adding that it was a “sober” and “responsible decision”.

After the announcement, Trump expressed support for Warsh but said the Fed board, which votes on rate decisions, was “hostile”.

Warsh declined to provide his own view on where he saw the Fed’s rates going, but the majority of his fellow policymakers said they believe rates would be hiked again before the end of this year to between 4-4.25%.

 

How Wall Street fared – the Dow suffered its worst week since March

The stock market traded sideways on Friday to wrap the Dow Jones Industrial Average’s worst week since March.

The blue-chip index on Friday fell 122 points, or 0.2%. It fell for a third week in a row, marking its largest three-week decline since March 27.

The S&P 500 ticked 0.2% higher, while the Nasdaq Composite rose 0.4% and actually finished the week higher.

A majority of stocks struggled Friday in the face of higher bond yields, though oil prices actually retreated after briefly spiking higher.

The yield on the 10-year Treasury note finished the week at 4.995%, while the yield on the 2-year note was at 4.741%. The latter notched its highest 3 p.m. close since July 1, 2024, according to Dow Jones Market Data.

“In the near term, continued uncertainty about macro factors such as oil prices, high yields, and the mid-term elections have the potential to exacerbate seasonal volatility,” Daniel Skelly, a portfolio manager at Morgan Stanley Wealth Management was quoted as saying in a report in US newspaper Barron’s.

For the week, the blue-chip Dow fell 1.7%, the benchmark S&P ticked down 0.1%, and the tech-heavy Nasdaq Composite rose 0.7%.

 

Fed hike will benefit banks: analysts

The Business Times (BT) reported analysts saying the US rate hike will benefit the banks.

“In general, we expect the Singapore banks to benefit from NIM expansion following the Fed’s 25 basis point rate hike,” Morningstar equity analyst Kathy Chan told BT.

But the impact should be greater next year because of the lag between US rate hikes, their transmission to the benchmark Singapore Overnight Rate Average (Sora) and the eventual repricing of bank loans, she said.

“For 2026, we continue to expect strong non-interest income growth to be the larger earnings driver,” added Chan.

Macquarie sees UOB as the most exposed to higher rates. About 43% of its loans are denominated in Singapore dollars, compared with 37 to 38% for DBS and OCBC, while net interest income (NII) accounts for 66% of revenue, against around 58% for its two peers.

For DBS, the impact is less straightforward. The lender said in August that its US dollar book remained negatively sensitive to higher rates, with annualised NII falling about S$4 million for every one basis point rise in US dollar rates.

Chan said this could partly offset the benefit from higher Singapore dollar rates, although Morningstar still sees DBS as a net beneficiary of a higher rate environment.

Higher rates, however, also raise the risk of stress among borrowers.

Rena Kwok, senior credit analyst at Bloomberg Intelligence, told BT that Singapore banks’ asset quality should remain “structurally resilient”, supported by tight risk controls and disciplined underwriting.

The banking system’s gross non-performing loan ratio was just 0.96% as at the second quarter, she noted.

 

Multi-Chem’s shares take a beating after CEO and COO interviewed by CPIB

Mainboard-listed IT distribution company Multi-Chem announced on Thursday that its CEO, chief operating officer (COO) and two senior employees have been interviewed by the Corrupt Practices Investigation Bureau (CPIB).

Multi-Chem shares plummeted right at market open, plunging more than 40% in morning trade, or S$1.84 to S$2.50. The sharp drop triggered the Singapore Exchange’s (SGX) “circuit-breaker” mechanism, which enforces a 10% price band and a five-minute cooling-off period when a security experiences sudden volatility.

Although the stock then rebounded to recoup all this loss, it came under pressure again on Friday, plunging S$1.68 or 38.7% to S$2.66 with 928,000 traded.

In a regulatory filing to SGX, the company’s audit and risk-management committee (ARMC) disclosed that CEO Foo Suan Sai and COO Han Juat Hoon were interviewed by the anti-graft agency.

As part of the ongoing probe, CPIB officers visited the group’s premises and seized several documents.

These include certain financial accounts of the group dating from an earlier year to the present, employee-claim documents relating to group personnel and an individual from a vendor, and an agreement relating to the same vendor.

 

Retail investors were net buyers of S$888m of stocks between 4-16 Sep: SGX Research

In a 17 Sep Market Update, SGX Research reported that following the STI’s new high of 5,828.5 on 4 Sep, retail investors net bought S$888 million of Singapore stocks over the subsequent eight trading sessions through to 16 Sep.

“This lifted cumulative net retail inflow for 2026 from S$3.13 billion to S$4.02 billion, while institutional net selling widened by S$163 million over the same period’’ said SGX Research, adding that DBS Group Holdings, Oversea-Chinese Banking Corporation and Singapore Exchange accounted for around two-thirds of aggregate retail net buying, highlighting a concentration of flows in large-cap benchmark constituents.

“ISDN recorded the highest net retail inflow relative to market capitalisation within the SMID universe since 4 Sep, following record 1H26 revenue, a 707% increase in profit attributable to shareholders and an industrial automation order book that more than doubled from a year earlier’’.