The irrational exuberance of surplus liquidity has finally come to an end, as most markets corrected sharply following a sell-off in technology stocks. But according to OCBC’s head of research Carmen Lee, Singapore stocks could prove a safe harbour to tide over stronger headwinds in the face of more attractive stock valuations. 

“While the Singapore market underperformed during the recent uptrend, it is also less volatile during the Sep 2020 market downtrend, making it ideal as additional holdings to a diversified stock portfolio,” she writes in a 14 September broker’s report. While the S&P 500 fell 6.7% from its September peak, the STI only lost 2% -- a relatively small correction vis-a-vis most markets. 

This stability arose as the SGX missed out on the strong market rally that began in March 2020 due to a lack of tech growth stocks on the index. The Straits Times Index (STI) is still down 23% y-t-d compared to gains for S&P 500 and Chinese, Taiwanese and South Korean markets in the same period due to their stronger tech exposure. Its recovery is also one of the worst in the region, regaining only 11.5% relative to the 12.9% (Hong Kong) to 61.7% (South Korea) recovery across Asia. 

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