Banks drag STI below 5,000 post-Budget, but analysts see ample ‘fiscal dry powder’

[SINGAPORE] The Singapore market pulled back on Friday (Feb 13) following Budget 2026 announcements, even as the government unveiled measures to boost existing equities, startups and new listings.

On Thursday, the Straits Times Index (STI) crossed the 5,000-point barrier before the statement was delivered, buoyed by a strong 43.5 per cent net profit increase for Singtel. It later closed 0.7 per cent up at 5,016.76 points after the Budget statement.

But the momentum did not hold. As at 2.30 pm on Friday, the STI fell 1.6 per cent to 4,936.51, dipping back below the 5,000 mark. This drop was led by local banks’ shares – DBS fell 1.7 per cent, while OCBC slid 3.1 per cent and UOB declined 2.4 per cent.

The STI ended Friday’s session at 4,937.78, while DBS pared some losses to end 1.2 per cent lower; UOB closed 2.6 per cent down; and OCBC ended 3.1 per cent lower.

Among STI counters, Singtel shares ended Friday 1.8 per cent down, and ST Engineering closed 1.8 per cent lower. Household spending staple Sheng Siong closed 1.1 per cent down.

The drop in Singapore’s market echoed a fall in the US, where the Dow Jones Industrial Average index declined 1.3 per cent, the S&P 500 dropped 1.6 per cent, and the Nasdaq Composite contracted 2 per cent.

Despite the morning dip, analysts believe the broader narrative remains positive. Growth in 2026 is expected to be underpinned by what Maybank calls a “sustained AI boom” and a “buoyant capital market” supported by falling interest rates.

The bank’s economists on Friday noted that while near-term handouts were scaled back from those given out in the 2025 election year, the Budget leaves ample “fiscal dry powder” to support the economy if needed.

JPMorgan also reiterated a positive view on Singapore equities after the Budget statement, pointing to the STI’s sustained outperformance against its Asean peers. The index has rallied 28 per cent in the past 12 months.

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“A strong macro backdrop, positive surprises in the fiscal buffer and a continuing strong government commitment to reinvest and transform the economy should fuel growth in the private sector,” said JPMorgan on Friday.

These factors, alongside an extension of financial market support, should drive Singapore equities closer to its 6,000-point STI target, it added.

Budget 2026 to boost equities

In his statement, Finance Minister Lawrence Wong announced that the Equity Market Development Programme (EQDP) of the Monetary Authority of Singapore would receive further support – a S$1.5 billion top-up to the Financial Sector Development Fund. Wong is also the prime minister.

The Anchor Fund will also get more support, through a second S$1.5 billion tranche from the government and Temasek. The fund aims to attract and anchor high-quality listings.

Not only that, S$1 billion will be set aside for the Startup SG Equity Scheme, as its scope is broadened to cover growth-stage companies, instead of just early-stage startups.

JPMorgan said that the new optional CPF lifecycle investment scheme would enable investors to generate higher returns over the longer term, and provide additional inflows into riskier asset classes.

Sheng Siong, ST Engineering and banks the winners

Analysts on Friday singled out winners of the budget, including domestic consumption, defence and technology as key beneficiaries.

Household support packages are expected to lift mass-market spending, favouring staples like Sheng Siong and DFI Retail , said RHB analyst Shekhar Jaiswal.

Maybank analysts said that the CDC vouchers – S$500 to each Singaporean household – would specifically sustain “heartland spending and supermarket traffic”.

The vouchers should “further enhance purchasing power”, said JPMorgan, which is “rising on a firm trend”, with the median household’s real income improving by 6.8 per cent.

The government’s readiness to spend “more than the usual 3 per cent of GDP” on defence – with the focus on unmanned systems – supports a bullish outlook for engineering firms like ST Engineering and Addvalue Tech , said Maybank.

Meanwhile, Maybank analysts highlighted the “sizeable liquidity boost” from the expanded EQDP as a key driver for the financial sector. This is expected to lift the Singapore Exchange and trading platforms such as iFAST; local banks like DBS, OCBC and UOB stand to gain from increased market activity and lower credit risks.

The push for artificial intelligence (AI) and advanced manufacturing is set to benefit tech manufacturers such as AEM , Frencken and UMS , while Keppel DC Reit is tipped to benefit from the new AI park at one-North.

The government’s upward revision of its surplus estimate to S$15.1 billion was also more than double the earlier one of S$6.8 billion. JPMorgan said this “creates a significant buffer to reinvest into the economy, extending the growth momentum”.

With the Budget statement throwing the spotlight on key sectors – including semiconductor advanced packaging, AI applications and adoption, quantum technology and green energy – the investment bank said this should benefit stocks in the Internet, telecom and semiconductor sectors.

Its top picks included DBS and UOB – but not OCBC – as well as SGX , UOL , Keppel , CapitaLand Integrated Commercial Trust , City Development Limited , ST Engineering, Singtel and Seatrium .

For more of BT’s Budget 2026 coverage, go to bt.sg/budget26