Core Insights - The Straits Times Index (STI) has increased by 16.7% year-to-date, but the major contributors are not the banks, which dominate the index weight [1][4] - The banking sector, particularly DBS, OCBC, and UOB, is facing challenges with declining net interest income and dividend cuts, while DBS is priced at a premium [2][3] - Real estate, including REITs, is positioned to contribute significantly to the index's performance, with several REITs increasing distributions after a tough period [4][5][6] Banking Sector - DBS Group, OCBC, and UOB control over 50% of the STI weight, but both OCBC and UOB reported declining net interest income in the first half of 2025, leading to dividend cuts [1][2] - DBS shares have risen over 21% year-to-date, but are priced at 2.2 times book value, indicating reliance on maintaining or growing dividends [2] - UOB shares have decreased by 5% year-to-date, while OCBC shares have remained relatively stable [2] Telecommunications Sector - Singapore Telecommunications (Singtel) shares have increased nearly 40% year-to-date, driven by its Singtel28 transformation plan [3] - However, Singtel's Australian subsidiary, Optus, has faced network outages, which could hinder its revenue generation and transformation efforts [3] Real Estate Sector - Real estate contributes 16.7% to the STI and is expected to perform well as REITs recover from previous challenges [4] - CapitaLand Integrated Commercial Trust, Frasers Centrepoint Trust, and Keppel DC REIT have raised distributions this year, indicating a positive trend [5] - Mapletree Pan Asia Commercial Trust recently increased its distribution per unit for the first time in six quarters, signaling a recovery [6] Dividend Projections - Singapore Exchange (SGX) aims for a 40% increase in annual dividends by FY2028, while Singapore Technologies Engineering forecasts a 6% year-on-year dividend increase for 2025 [7][8] - These projections reflect a commitment to returning value to shareholders despite challenges faced by other sectors [7][8] Overall Market Dynamics - While 60% of the STI is underperforming, the remaining components, particularly REITs and companies like SGX and ST Engineering, are expected to provide dividends and support the index [9] - The focus should be on stocks that offer dividends during periods of market uncertainty, rather than speculating on the STI's direction [9]