Singapore bank stocks being pummeled, with STI down 8.1% at lunchtime and HK down 10.7% in Asia market turmoil

[SINGAPORE] Asian markets extended a global stock collapse on April 7, and Wall Street futures fell as US President Donald Trump refused to draw back global tariffs, which might plunge the globe into a recession. Singapore's Straits Times Index (STI) fell 8.57 percent, or 328.20 points, to 3,497.66 when trading began.

The decline was the blue-chip index's worst intraday loss since the 8.9 percent slump during the global financial crisis on October 24, 2008, and it outperformed the 8.4 percent decrease observed during the Covid-19 selloff on March 23, 2020. After attempting to recover losses, the STI was down 8.1%, or 310.64 points, during the midday trading break.

The sharp decline in Asian markets follows a turbulent week on Wall Street, where the S&P 500 and Nasdaq Composite posted their worst weekly performances since March 2023. Analysts attribute the sell-off to growing fears that prolonged US tariffs could disrupt global supply chains, particularly in technology and manufacturing sectors, which are critical to Asia’s export-driven economies. This has led to a flight to safety, with investors dumping riskier assets in favor of traditional havens like US Treasuries and the Japanese yen.

"The STI has experienced sharp single-day declines in past periods of global uncertainty, including a 7.4 percent drop in March 2020 during the Covid-19 pandemic and an 8.3 percent fall in October 2008 during the global financial crisis," said Mr David Gerald, founder, president, and CEO of Securities Investors Association (Singapore), or Sias.

"According to experts, if tariffs are sustained, they could contribute to higher inflation and slower global growth, which may in turn trigger further volatility and potential sell-offs in markets globally, including Singapore," the minister said.

The ripple effects of the tariffs are already being felt beyond equities. Bond markets have seen a surge in demand for safe-haven assets, with yields on 10-year US Treasuries falling to their lowest level since January. Meanwhile, credit default swaps (CDS) for emerging-market sovereign debt have widened, reflecting heightened investor anxiety over potential defaults in economies heavily reliant on US trade.

Mr S Nallakaruppan, president of the Society of Remisiers (Singapore), stated that while the sell-off in STI is severe, there is less fear this time around compared to earlier instances such as Covid-19 in March 2000 and the global financial crisis in 2008.

Investors have seen the market collapse and bounce numerous times and are "more savvy" now, he said, adding that the panic selling this morning may have been caused by algorithmic trading. Bank equities were among the largest losers in Asia's important market benchmarks, with concerns that dramatic rate cuts by central banks, particularly the US Federal Reserve, in reaction to a recession would hurt bank earnings.

At midday in Singapore, DBS shares sank 9.2 percent to 39.02, UOB fell 6.1 percent to 33.29, and OCBC lost 7.6 percent to $15.35. HSBC's Hong Kong-listed shares fell 13.9%, while Standard Chartered's plunged 16.7%.

The banking sector’s downturn has also sparked concerns about liquidity strains, particularly for regional lenders with significant exposure to trade financing. Analysts warn that if the tariff standoff persists, banks may face tighter lending conditions, further squeezing businesses already grappling with higher input costs. This could exacerbate the slowdown in corporate investment across Asia, where many firms rely on US-bound exports for revenue.

Hong Kong's Hang Seng Index led Asia's losses, falling 10.7 percent - the largest one-day drop since the 2008 global financial crisis. China's Shanghai Composite index fell 6.34 percent as it faces 54% tariffs from the United States. Japan's benchmark Nikkei market plunged 6.02 percent, following an 8.03 percent drop earlier, with futures trading paused due to a circuit breaker. South Korea's Kospi index plummeted 4.03%, while Australia's S&P/ASX 200 dropped 4.73%.

Speaking on Sunday evening onboard Air Force One as he returned to Washington following a weekend of golf in Florida, President Trump stated that he is not purposefully designing a market sell-off, "but sometimes you have to take medicine to fix something."

As he spoke, US stock futures fell, indicating the continuation of a devastating two-day sell-off that has already wiped US6.5 trillion (S6.5 trillion (S8.8 trillion) from US markets. Dow Jones Industrial average futures plunged 1,531 points, or 4%, indicating another tough session on Monday (April 7). S&P 500 futures fell 4%. Nasdaq futures fell 4%.

On April 5, Mr Trump commented on Truth Social that people should "hang tough" and that this was a "economic revolution." US Commerce Secretary Howard Lutnick told CBS News that tariffs will not be delayed. Tariffs are coming... They will undoubtedly remain for several days or weeks.

Market participants are now closely monitoring the Federal Reserve’s next moves, with expectations growing for an emergency rate cut if volatility persists. However, some economists caution that monetary policy may have limited impact in countering trade-driven shocks, raising questions about whether coordinated fiscal stimulus from major economies will be necessary to stabilize markets.

JPMorgan Chase & Co. senior economist Bruce Kasman said on April 5 that US tariffs have a 60% chance of pushing the global economy into a recession this year. His note had the title "There will be blood."

Mr Chetan Seth, an analyst at Japanese investment bank Nomura, advised investors to take a conservative stance on Asian markets outside of Japan unless US policy changes.

"Our sense is that the fundamental impact of tariffs and US slowdown is yet to come as tariffs weigh on US hard data such as inflation, labour market, consumption and corporate earnings over the next few weeks and months, which we believe the market will intensely scrutinize," he told analysts.

The Singapore currency declined 0.2 percent to $1.3488 per US dollar. On a year-to-date basis, the currency is still 0.8% ahead against the dollar. Other currencies, which faced significantly larger tariffs, fared poorly. The Malaysian ringgit sank 0.7%, while the South Korean won dropped 0.6%.

Mr Taimur Baig, chief economist at DBS Bank, believes that with the balance of risks to Singapore's growth and inflation outlook skewed to the downside, the Monetary Authority of Singapore (MAS) will slow the pace of the Singapore dollar's trade-weighted appreciation at its next policy meeting on April 14.

A weaker currency may benefit Singapore exports by offsetting some of the pricing impact of the new tariffs. Other Asian central banks may ease by lowering interest rates to boost economic growth Mr. Baig continued: "We estimate direct negative growth impact of 0.50 to 0.75 percentage points to our Singapore 2025 GDP growth forecast of 2.8 per cent for 2025."

He cautioned that if the US continues to apply worldwide sectoral tariffs on semiconductor and pharmaceutical imports, which may be as high as 25%, Singapore's economy will take a far larger damage than currently estimated. US crude fell below $60 a barrel for the first time since April 2021, citing fears of a worldwide recession.

Brent crude declined US$2.05 to US$63.53 a barrel, while US crude dropped US$2.07 to US$59.92. Trump's broad tariffs will raise expenses for businesses, reducing demand for oil.

Even gold was caught up in the sell-off, falling 0.7% to US$3,013 per ounce. Dealers feared if investors were withdrawing profits to cover losses and margin calls on other assets, potentially leading to a self-feeding fire sale.

The commodities rout underscores the broad-based nature of the market turmoil, with industrial metals like copper and aluminum also tumbling on fears of weakening demand. Analysts note that while gold typically benefits from risk aversion, its decline suggests extreme liquidity pressures, as investors unwind leveraged positions across asset classes.

Mr Nallakaruppan of the Remisiers Association stated that the Singapore market will continue turbulent, and he cannot predict where the bottom will be. However, he added that Singapore stocks are also primarily "fundamentally driven," so as long as investors have holding power, they can continue to invest in stocks with a high dividend yield, a low price-to-earnings ratio, and a high price-to-book ratio. They may also consider government-linked Reits with good balance sheets.