Straits Times Index Update: Oversold, Overbought (26 Sep 2025)

The Straits Times Index (STI) closed at 4,265.98 on 26 September 2025, slipping from 4,302.71 a week earlier. That’s a 0.85% drop.

It may not look dramatic on paper, but this small move is part of a bigger story. Investors are dealing with two main worries:

1. What the US Federal Reserve will do next – rates have stayed high for longer than many expected, and every hint about future policy moves is moving markets.
2. AI fatigue – the excitement around artificial intelligence is cooling. People are asking harder questions: how soon will companies really make money from it, and how much of the hype is justified?

Put together, these factors have kept investors cautious.

What’s Behind the STI’s Move?

The STI is made up of 30 big companies across banking, property, transport, telcos, and more. Right now, the main pressure is coming from the banks.

• Banks (DBS, OCBC, UOB): Higher interest rates boosted their profits earlier by widening lending margins. But now, worries are growing about slower loan growth, bad debts, and weaker business confidence. OCBC and UOB are currently showing oversold signals, meaning their prices have dropped more than usual in a short time.
• Property and REITs: Real estate trusts are popular with income investors, but they’re sensitive to interest rates because of their borrowing costs. Higher rates = higher costs = less distributable income.
• Transport and industrials: Companies like Singapore Airlines and Keppel are holding up better. SIA is still benefitting from strong travel demand, although fuel prices are a risk.
• Telcos and consumer stocks: Singtel is still facing competition, while consumer companies are dealing with higher costs.

The short version? Banks dragged the index lower this week.

Oversold vs Overbought: What Does It Mean?

Traders use tools like the Relative Strength Index (RSI) to judge whether stocks have been pushed too far in one direction.

• If the RSI is below 30, a stock is often called oversold.
• If it’s above 70, it’s seen as overbought.

But here’s the important bit:

• Oversold doesn’t always mean cheap. A stock can stay oversold for weeks if negative news keeps coming.
• Overbought doesn’t always mean expensive. If a company is doing really well, its stock can keep climbing even when “technicals” say it’s overbought.

So while these signals are useful, they’re not crystal balls.

Spotlight on OCBC and UOB

Both OCBC and UOB are now technically oversold. Let’s unpack what’s going on.

OCBC

• Strong player with businesses in wealth management, insurance (via Great Eastern), and corporate banking.
• Main concern: it has big exposure to China, where property market troubles and slower growth are weighing on sentiment.
• Its valuation is now below its historical average, suggesting the market may be pricing in too much bad news.

UOB

• Focused more on Southeast Asia, and recently bought Citi’s consumer banking businesses in several countries.
• Concerns are similar to OCBC’s: slowing loan growth and risk of defaults.
• Dividend yield looks attractive, but investors are still cautious.

Both banks may look oversold, but investors shouldn’t rush in without considering the bigger picture: interest rates, global growth, and regional risks.

Investor Psychology: Why We Misread Signals

Markets aren’t just about numbers. Emotions play a big role. Here’s how psychology can trip investors up:

• Recency bias: Assuming the latest trend will keep going forever.
• Herding: Buying (or selling) just because everyone else is doing the same.
• Loss aversion: Selling too quickly because of fear, even if the fundamentals are still strong.

Recognising these patterns helps us step back and make calmer decisions.

What Could Happen Next?

Looking ahead to the last quarter of 2025, there are a few scenarios:

1. Fed turns friendlier – If the US signals rate cuts for 2026, global markets (including Singapore) could rally. Banks might bounce back quickly.
2. Fed stays firm – If rates remain high for longer, bank stocks and REITs could stay under pressure.
3. China stabilises – A recovery there would help Singapore banks and trade-related firms.
4. AI fatigue deepens – Global tech sentiment could weigh on all markets, even though the STI isn’t heavily tech-focused.

Key Takeaways for Investors

• Don’t blindly buy oversold stocks – Sometimes they’re oversold for good reason.
• Don’t automatically sell overbought stocks – Strong companies can stay overbought for months.
• Keep the long view – Focus on solid balance sheets, sustainable dividends, and real growth stories.
• Stay diversified – Don’t let your portfolio depend too heavily on a single sector like banks or REITs.

Wrapping Up

The STI’s small weekly drop of 0.85% hides a lot of nervousness beneath the surface. The main story is about banks, with OCBC and UOB sliding into oversold territory.

But oversold is not the same as undervalued, just like overbought isn’t the same as overpriced. Investors should weigh technical signals against fundamentals and global trends.

The next few months will likely be shaped by the Fed’s decisions, China’s outlook, and whether the world gets over its AI fatigue. For Singapore investors, the best approach is to stay calm, stay diversified, and remember that markets often exaggerate in both directions.