STI slips despite MTI upgrade

Singapore’s market sent a conflicting signal on Aug 12. The Ministry of Trade and Industry turned more constructive on growth, lifting its full-year projection to a 1.5 to 2.5 percent range, yet the Straits Times Index still slipped 0.3 percent to 4,220.72, logging a third straight decline. At first glance this looks like a market ignoring better data. Look closer and the picture is clearer. The session revealed how Singapore’s index construction, sector mix, and idiosyncratic headlines can overpower a supportive macro tape.

Regionally, risk appetite was firm. Tokyo’s benchmarks printed fresh records, the Hang Seng and Shanghai Composite advanced, and Malaysia’s KLCI edged higher. The tone was helped by a 90-day extension of the US-China tariff truce that keeps levies where they are for now, reducing near-term escalation risk and giving operators better price visibility into year-end. The Kospi lagged, but the broader Asia mosaic leaned positive. In that context, the local underperformance stands out. It is not a referendum on the growth upgrade. It is market microstructure doing what it does.

Start with composition. The STI is heavily skewed to financials, real assets, and a handful of industrials. When banks are mixed and a heavyweight industrial sells off, the index will struggle to follow the region even if breadth across the rest of the board is decent. That is precisely what happened. Gainers outnumbered losers across the market, yet the benchmark still faded because the big weights did not carry. DBS and UOB inched higher, but OCBC eased, leaving the trio net-neutral as a group. Meanwhile, Keppel fell after announcing plans to divest M1’s telecommunications business to Simba Telecom, a move that will crystallize an accounting loss largely from goodwill and intangibles. The headline loss is non-cash in nature, but it still drags sentiment in the short run by reframing expected return timing from the asset. When a top-five constituent reprices on deal optics, the index feels it.

This is where the divergence between the macro message and the market print becomes instructive. MTI’s upgrade reflects better first-half delivery and a mild improvement in external demand expectations. The trade truce extension, while temporary, lowers the probability of a fresh shock to regional supply chains. Both developments argue for stability. Yet investors are also rationally processing front-loaded activity in the first half, a still-fragile goods cycle, and the reality that earnings upgrades will remain sector-specific. In Singapore, that usually means banks and selected services, not a broad mechanical lift across every index pillar on the day guidance improves.

There is also the question of where incremental capital wants to sit when the global story brightens. On days when Japan breaks records, global allocators often rotate toward higher-beta markets or sectors that offer operational leverage to growth. Singapore’s benchmark, with its dividend tilt and defensive balance sheets, can lag in those momentum windows even though it benefits from durability and yield in the medium term. That does not contradict the growth narrative. It simply reflects a different factor exposure. As global optimism rises, equity beta and duration preferences change; the STI’s factor mix does not always align with those bursts.

Stock-specific currents reinforced the effect. DFI Retail was the top blue-chip gainer, but that single point of strength could not counterbalance the weight of Keppel’s decline. The banks’ mixed close told a nuanced story as well. With rate cuts still a live possibility into the fourth quarter, the market is toggling between comfort on credit quality and caution on net interest margin glide paths. A gentle drift rather than a decisive bid is consistent with that debate. It also explains why breadth can look fine while the headline index settles lower.

If you zoom out, the day reads like a reminder that headline-level optimism does not automatically reprice index levels in Singapore. The market will reward clearer earnings line-of-sight, cash-flow timing, and corporate action that signals capital discipline. The prospective sale of M1 sits in that frame. Strategically, divesting a non-core or lower-synergy business can sharpen focus and improve return on capital over time, but the accounting optics land first and the pro-forma benefits require a new delivery track. In the near term that is gravity, not a verdict on policy or growth.

The regional setup matters for the next leg. The 90-day tariff pause reduces one source of uncertainty, but it does not resolve it. If the truce holds into year-end and US inflation continues to moderate, the case for Asia earnings resilience strengthens, and Singapore’s yield plus quality profile becomes more attractive on a cross-market basis. If the pause expires without progress, the bid will again favor markets with internal demand engines and higher operating leverage to domestic policy support. The STI can keep pace in either world, but the path is different. In the first case, banks’ fee income and loan growth stabilize even as margins compress from peak levels. In the second, defensives and services carry more of the load, while industrials depend on deal execution to unlock value.

For now, the simplest read is also the most accurate. The STI underperformed on a day when breadth was positive because its biggest weights did not participate and a headline corporate action reframed near-term expectations. The macro story did not deteriorate. Singapore’s index just told a more granular truth about how this market moves when global risk is rising elsewhere. That gap can close, but it will take delivery, not declarations. The focus should remain on earnings guidance from the banks, clarity on deal proceeds and capital deployment at the industrials, and whether regional policy calm outlives the current truce window. Until then, days like Aug 12 are reminders. A stronger outlook can coexist with weaker prints when market structure and stock-specific news say so.