6 STI Stocks Are Looking Oversold. Should We Be Buying the Dip?

Dear readers, if you have been following the Singapore stock market, you would probably have noticed that DBS, OCBC and UOB have taken quite a beating recently.

The selling comes amid their latest earnings announcements, concerns over banking profitability and growing nervousness in global markets about whether the AI investment boom has created an unsustainable stock market bubble.

But here’s something interesting.

Besides our three local banking giants, I noticed that three other Straits Times Index (STI) stocks are also entering technically oversold territory based on RSI:

• Keppel
• ST Engineering
• Wilmar International

That brings the total to six blue-chip stocks worth keeping an eye on.

So, is this a buying opportunity for Singapore investors? Let’s take a closer look.

1. DBS, OCBC and UOB: Banking giants under pressure

The three local banks have been among Singapore investors’ favourite dividend stocks for years. However, their latest earnings have given investors some reasons to reassess their expectations.

DBS reported third-quarter net profit of S$2.81 billion, down 5% year on year. A particularly disappointing development was the 65% decline in markets trading income. While its wealth management business remains strong, investors are becoming more cautious about its earnings outlook amid global market volatility.

OCBC delivered a relatively stronger performance, with third-quarter net profit increasing 3% to S$2.04 billion. Its banking operations profit reached a record S$1.9 billion. Nevertheless, declining net interest margins and weaker investment performance at Great Eastern remain areas to watch.

UOB saw third-quarter net profit jump 182% to S$1.25 billion, although this was largely due to a lower credit provision base compared with last year. Earnings also missed analysts’ expectations, while its net interest margin continued to decline.

Personally, I think DBS and OCBC remain interesting stocks to monitor given their strong banking franchises and wealth management businesses. For UOB, I would like to see clearer signs of earnings stabilisation.

The bigger concern is whether global market weakness could affect their trading income and wealth management activities in the coming quarters.

2. Keppel: Is the market overlooking its infrastructure story?

Keppel is an interesting stock because its business has transformed considerably over the years.

Today, it has positioned itself around infrastructure, real estate and connectivity, with exposure to investment themes such as data centres, energy infrastructure and digital connectivity.

The data centre business is particularly relevant given the continued expansion of AI and cloud computing.

However, the growing concerns about AI valuations and the sustainability of technology companies’ capital expenditure could also affect sentiment towards infrastructure-related stocks.

I would be watching Keppel’s ability to grow recurring income, monetise investments and generate attractive returns from its infrastructure assets.

If its share price weakness is largely driven by broader market sentiment rather than deteriorating fundamentals, it could become an interesting stock to watch.

3. ST Engineering: A defensive stock caught in the sell-off?

ST Engineering is another company worth monitoring.

Its businesses span aerospace, defence and public security, as well as urban solutions and satellite communications.

These are supported by longer-term structural trends, including growing defence spending, aircraft maintenance demand and digital infrastructure investment.

Unlike technology companies whose valuations are closely tied to expectations surrounding AI, ST Engineering has a different set of business drivers.

What I would watch is its order book, earnings growth and profit margins.

For investors looking beyond the banking sector, ST Engineering offers exposure to a different investment theme.

However, its valuation remains important. A falling share price does not automatically make it cheap.

4. Wilmar: An opportunity beyond banks and technology?

Wilmar International offers something different from the other five stocks.

As one of Asia’s major agribusiness groups, its operations span palm oil, oilseeds, grains, sugar and food products.

Its earnings are influenced by agricultural commodity prices, processing margins and global food demand.

This makes Wilmar an interesting diversification candidate for investors who are heavily exposed to Singapore banks and technology-related stocks.

However, commodity-related businesses can experience considerable earnings volatility.

I would be watching its processing margins, commodity price movements and signs of earnings improvement before becoming more constructive.

5. Should we be buying these six stocks?

Here is what makes the current situation interesting.

We have six companies operating in very different industries, yet all are experiencing selling pressure.

Personally, I would not rush to buy simply because these stocks are technically oversold.

I would prefer to see some stabilisation in their share prices and examine whether their underlying earnings outlook remains intact.

It is also worth remembering that the global concerns surrounding AI valuations could lead to further market volatility. Even fundamentally sound companies are not immune to a broader equity sell-off.

For long-term investors, accumulating gradually rather than committing all their capital at once may be a more sensible approach.

My two cents

I find the current situation quite interesting.

Singapore investors have traditionally looked at DBS, OCBC and UOB as core blue-chip holdings for dividends and long-term wealth building.

But this latest correction has brought three other names into the picture: Keppel, ST Engineering and Wilmar.

Personally, I would keep all six stocks on my watchlist over the coming weeks.

I am particularly interested in whether DBS and OCBC can stabilise following their earnings announcements, whether Keppel can maintain its infrastructure growth story, and whether ST Engineering can demonstrate continued earnings resilience.

As for UOB and Wilmar, I would like to see clearer signs of earnings improvement.

Of course, an oversold stock can always become more oversold.

But sometimes, market corrections also create opportunities to revisit good companies at more reasonable prices.

The question is: When the market eventually recovers, which of these six blue chips will be best positioned to lead the next rebound?

That’s something worth watching.