The STI Retreats Despite Positive Manufacturing Data in Singapore
Local equities in Singapore ended lower on Wednesday, September 3, with the benchmark Straits Times Index (STI) experiencing a decline, even as new data indicated a slight improvement in the country’s critical manufacturing sector.
Data released by the Singapore Institute of Purchasing and Materials Management showed that the sector’s Purchasing Managers’ Index (PMI) edged up to 50 in August, rising from 49.9 recorded in July.
The 50-point mark is a significant threshold, representing the division between sector contraction (below 50) and expansion (above 50).
Perhaps more significantly, the PMI for the electronics industry, which alone accounts for roughly one-third of the nation’s entire manufacturing output, showed a more noticeable climb, increasing from 50.2 in July to 50.4 last month.
Jose Torres, a senior economist at Interactive Brokers, highlighted the positive momentum in the electronics space.
He noted that electronics companies reported an encouraging uptick in several key performance metrics, including new orders, exports, factory output, supplier deliveries, and input purchases, all suggesting stronger underlying demand.
Despite these strong, fundamentally positive signals from manufacturing—a key driver of the Singapore economy— the benchmark Straits Times Index (STI) fell by 0.2 per cent, or 91.18 points, to close at 4,289.33.
This seemingly counterintuitive decline suggests that broader market sentiment, possibly influenced by external or geopolitical factors, outweighed the local economic good news.
Market Movers and Regional Performance Contrasts
Analysis of the broader market revealed a mix of trading activity with more stocks gaining than losing, yet the movement of heavyweight index components ultimately dragged the Straits Times Index (STI) lower.
Across the overall market, trading saw gainers outnumber decliners by a margin of 301 to 228, suggesting that positive performance was widespread among mid and small-cap stocks.
Total trading volume was substantial, with 1.3 billion securities transacted, valued at S$1.3 billion.
On the STI itself, ST Engineering provided the biggest boost, with its counter adding 1.8 per cent, or S$0.14, to close at S$7.88, demonstrating strong investor confidence in the defense and engineering conglomerate.
Conversely, the index was significantly dragged down by the performance of Frasers Logistics & Commercial Trust, which recorded a decline of 1.6 per cent, losing S$0.015 to close at S$0.915.
Further pressure came from the three major local banks, all of which finished the day in the red.
DBS fell by 0.6 per cent, or S$0.31, to S$50.40, UOB was down 0.1 per cent, or S$0.04, closing at S$35.56, and OCBC retreated 0.3 per cent, or S$0.05, ending at S$16.80.
Meanwhile, regional indices showed a mixed finish on Wednesday, reflecting varied investor confidence across Asia.
South Korea’s Kospi managed a gain of 0.4 per cent, and Malaysia’s Kuala Lumpur Composite Index rose by 0.1 per cent.
In contrast, Hong Kong’s Hang Seng Index lost 0.6 per cent, and Japan’s Nikkei 225 declined by a steeper 0.9 per cent.
Geopolitical Tensions Influence Global Investor Sentiment
The mixed market performance both locally and across Asia was partially attributed to rising investor pessimism rooted in complex and evolving geopolitical tensions, particularly those concerning major global powers.
Interactive Brokers’ senior economist, Jose Torres, pointed out that the geopolitical climate was generating investor caution, leading to a flight to safety.
This pessimism was evidenced by safe-haven gold reaching a new high, the first time it had done so since April.
Torres specifically noted the significant development involving Moscow and Beijing, who are “securing a pipeline deal that is strengthening prospects of long-term collaboration.”
This partnership is evolving at a critical juncture where New Delhi is actively seeking to forge closer ties with its Far East neighbors, all against the backdrop of weakening diplomatic and economic relations with Washington.
Such large-scale, power-shifting geopolitical realignments introduce layers of uncertainty into global markets, impacting investor appetite for riskier assets like equities.
The defensive positioning, despite the positive local manufacturing data that traditionally would boost the STI, suggests that international macro concerns are temporarily overshadowing domestic economic fundamentals.
The Singapore market, with its deep integration into global trade, is highly sensitive to such shifts in the geopolitical and trade environment.
