Southeast Asia’s largest lender DBS (DBSM.SI) led Singapore banks higher as of midday on Friday, as investors sought bargains among stocks that have underperformed so far this year.

At the lunch break, the Straits Times Index (STI) <.FTSTI> was up 3.31 points at 3,150.98. The total value of shares traded in the morning session was $774.9 million, up from $628.3 million on Thursday.

“There was bargain hunting of underperformers this morning and DBS is an obvious laggard,” a trader with a local brokerage said. “You can blame it on QE2, which means there’s lots of money sloshing around.”

At midday, DBS shares were up 2% at $14.40 with 9.1 million shares traded. The stock, which was down 6.5% this year against a 8.7% rise in the STI, rose as much as 2.5% earlier in the session.

Oversea-Chinese Banking Corp (OCBC.SI) gained 1%, while United Overseas Bank (UOBH.SI) rose 0.2%.

Song Seng Wun, an economist at CIMB Research, said Singapore’s banking sector has been one of the most stable in the region. “You have prudent banks which have been reminded by the Asian Financial Crisis and the 2008 Global Financial Crisis,” he said.

Shares of Chinese shipbuilder Yangzijiang (YAZG.SI) rose as much as 2.6% after DMG upgraded the stock to “buy” from “neutral”. At midday, the shares were up 2.1% at $1.93 on a volume of 6.9 million shares.

Looking ahead, traders said the Singapore market will likely trade sidewards, barring surprise developments when European markets open. A broker said he expects the STI to trade between 3,140 and 3,160 points in the afternoon session.