Local shares went south yesterday after Wall Street posted its worst start to April since the Great Depression in 1929.
Investors took their cue from United States markets overnight, which tumbled on the first trading session after Easter on trade fears and a bearish turn for tech stocks.
US President Donald Trump's repeated threat to tear up the North American Free Trade Agreement did not help the mood.
The gloom sent the Straits Times Index (STI) down 18.61 points, or 0.54 per cent, to 3,412.15, with 1.5 billion shares worth $1.2 billion changing hands. Losers beat gainers 263 to 147.
Genting Singapore, Sembcorp Industries and Yangzijiang Shipbuilding were in the red, while gainers included Thai Beverage, Golden Agri-Resources and Hongkong Land.
IG market strategist Jingyi Pan said the price action suggests more pain ahead. "Both the anticipation for the list of targeted Chinese imports from the US and expectation for wage inflation to pick up in the upcoming March reading do not bode well for equity markets, one to watch in upcoming sessions."
DBS market experts Ke Yan Yeo and Janice Chua expect the STI to break out from 3,400 to 3,500 in one to two months. This will depend on how the US-China trade skirmish unfolds and the coming first-quarter earnings season.
The duo are keeping their base-case assumption for the STI year-end target at 3,715.
As inflationary pressures pick up, with the US Federal Reserve turning more hawkish and trade tariffs driving up the costs of goods in the US, they said inflation hedges and related stocks and exchange-traded funds (ETFs) should benefit. These include gold US$ ETF and oil-related stocks like rig builders Keppel Corp, Sembcorp Industries and Sembcorp Marine. Investors could also look at Lyxor Commodity US$ ETF and Lyxor CRB Ex-Energy US$ ETF, as well as commodity stocks like Olam, Wilmar, Bumitama and First Resources.
In property, DBS likes City Developments, UOL, Roxy-Pacific, CapitaLand and Hong Fok.
However, manufacturing stocks with China operations, like Hi-P and Sunningdale, are expected to be affected by the looming US-China trade skirmish, which they expect could drag on until the November US mid-term elections or escalate into a trade war involving multiple nations.
UOB and ST Engineering top the research house's list of big-cap stocks with good dividend payouts.