Local shares are in for a nerve-racking week ahead, with several key events likely to unsettle investors.
The big one that everyone is waiting for is the first interest rate hike in nearly a decade, which is likely to be announced in the middle of the week.
Jitters over the rate-hike timing have taken the emerging markets through a roller-coaster ride this year, with investors fearing that the move may trigger short-term but potentially drastic capital outflow and market volatility.
China's slowdown and a prolonged commodity slump have not helped to lift the mood ahead of the holiday season either. The global crude benchmark Brent futures are now at US$37.93 a barrel, just a hair's breadth above the seven-year low.
These concerns have led to Singapore's benchmark Straits Times Index (STI) losing some 16 per cent since the start of January - including a 1.54 per cent drop last week - to 2,834.63.
Given the proximity of the US Federal Reserve meeting and the torrent of headwinds, the STI is likely to fall further this week, staying below the resistance level at 2,920 while testing its immediate support level at 2,820, Phillip Futures dealer Yin Thu Tun said.
Beyond the year-end slump, market watchers are also cautious about the long-term outlook of several sectors, including the usually stable Singapore real estate investment trusts (S-Reits).
OCBC Investment Research analyst Andy Wong said the growth of distributions for S-Reits is likely to slow over the next two years, weighed down by a weakening economy, rising costs and falling demand.
Given this scenario, Mr Wong said he prefers S-Reits that exhibit "defensive attributes and favourable risk-reward profiles". "Our overall top picks are CapitaLand Mall Trust, Frasers Centrepoint Trust and Keppel DC Reit," he said.
Also in the Reit sector, BHG Retail Reit - the mainboard's new and only entrant this year - had a muted debut last Friday when it closed flat at its offer price of 80 cents.
BHG Retail Reit's Chinese retail property portfolio comprises five malls with occupancy rates ranging between 80.5 and 100 per cent. Its net property income is forecast to be $40 million next year, with a distribution per unit of 3.56 cents.
In a note last week, Phillip Securities tipped the fair value of BHG Retail Reit to be around 54 to 77 cents, suggesting that investors should wait for a better entry price.
Instead, the brokerage singled out CapitaLand Retail China Trust - with a target price of $1.90 - as a potentially better play to leverage on the Chinese consumer story.
Investors were given new concerns to worry about in recent weeks when the People's Bank of China allowed the yuan to resume its depreciation, likely a move to boost China's export competitiveness. The currency is now at its lowest in over four years, with the US dollar trading at 6.4552 against the yuan, the highest since August 2011.
Bank of Singapore chief economist Richard Jerram said investors should be cautious about the latest move to depreciate the currency.
"We have to be sensitive to the impact on other Asian currencies as well, as these suffered with the sudden yuan move in mid-August," he said. But he believed the current round of depreciation will only be a gradual weakening that is less disruptive than the drastic drop in the third quarter.