Profit-taking on bank stocks sent shares down yesterday after mixed messages from the United States on inflation policy and asset sales.
The Straits Times Index finished 0.69 per cent or 22.37 points lower at 3,226.34.
DBS fell 1.7 per cent or 36 cents to $20.74, OCBC shed 1.7 per cent or 18 cents to $10.65 and UOB lost 0.7 per cent or 16 cents to $23.19.
Investors were rattled by the US Federal Open Market Committee's June minutes, which showed that officials were divided on how to approach policy strategy at a time of low inflation and when to unwind its US$4.5 trillion (S$6.2 trillion) balance sheet.
Some saw the minutes as hawkish and pointing to possible interest rate hikes, even if data tells them it may be too early.
The Fed's asset reduction will impact market liquidity and could potentially cause rates to rise.
Investors are eyeing US June jobs data due later today (Singapore time) for clues on the pace of rate hikes.
UOB Kay Hian maintained an overweight call on local banks, saying that "normalisation of central banks' balance sheets could energise bank stocks and lift their valuations".
It also anticipates "a gradual re-rating for banks' share prices, with DBS' target price at $25 levels and OCBC's at $13 levels".
Other blue-chip losers included ComfortDelGro, which shed 1.8 per cent or four cents to $2.23, Golden Agri-Resources, down 1.3 per cent or 0.5 cent to 37.5 cents, and CapitaLand, off 0.5 per cent or one cent to $3.50.
While investors sold down the banks, they bought into property stocks. City Developments jumped 1.5 per cent or 16 cents to $10.83 and Yanlord Land Group rose 0.3 per cent or 0.5 cent to $1.77.
Local tech manufacturers were boosted by a 0.7 per cent jump on Wednesday in the tech-heavy Nasdaq Composite in the US.
Venture Corp rose 0.5 per cent or six cents to $11.89, AEM Holdings jumped 6.4 per cent or 14 cents to $2.34 and Sunningdale Tech climbed 5.7 per cent or 10 cents to $1.86.
A rebound in crude boosted local energy, shipbuilding and commodities counters, with Keppel Corp up 0.5 per cent or three cents at $6.40 while Yangzijiang Shipbuilding gained 0.8 per cent or one cent to $1.235. Wilmar International rose 0.9 per cent or three cents to $3.38.
Noble Group was the most actively traded counter, putting on a whopping 36.2 per cent or 17 cents to 64 cents on trade of 123.7 million shares.
It attracted a query from the Exchange but the company said it could not explain the unusual price and volume movements.
Bloomberg cited speculation that an investor may be building a stake.
Other hotly traded counters included ISR Capital, Jadason Enterprises and Moya Asia.