Singapore shares ended slightly lower on Monday as investors sold down second liners, but Singapore Telecommunications Ltd (SingTel) rose on hopes of a special dividend payout.
The benchmark Straits Times index slipped 0.17 percent, or 3.19 points, to end at 1,888.35. The index has gained seven percent since the start of the year but has failed to move convincingly above 1,900.
"The macroeconomic recovery in the US and Japan is well on track. The question now is whether the stocks have run ahead of earnings or not," said Kevin Scully, managing director at independent research firm Netresearch-Asia.
"Given that we had a very strong equities rally post Christmas without any meaningful correction, we are probably due for one," he said adding that the index may drop to 1,800 and then to 1,750.
"The key is that it's only a correction and the long term uptrend is still there. Any meaningful correction would be a buying opportunity," said Scully.
SingTel rose 0.41 percent to S$2.40 after Belgian telecom operator Belgacom, in which it has an 11.7-percent stake, launched a public share sale worth up to 9.3 billion euros ($11.34 billion), fuelling hopes of a special dividend payout.
DBS Group was steady at S$14.20 as analysts expected little impact from the merger of its Thai unit merger with other Thai banks to form Thailand's fifth-largest bank.
Thai Military Bank agreed on Monday a $375 million all-share take-over of DBS Thai Danu Bank and Industrial Finance Corp of Thailand to kick-start an industry consolidation.
"Big is better. DBS will have a smaller stake in a larger entity," said Leng Seng Choon, analyst of UOB Kay Hian, adding that the move would however have no significant impact given that the Thai unit contribution was small to the whole group.
DBS, which owns 51.7 percent in DBS Thai Danu, would own 16.1 percent of the merged bank.
In the broader market, losers beat gainers 242 to 105 as volumes fell to 613 million shares from 721 million on Friday.
The UOB Sesdaq Index, which tracks small capitalised stocks, fell 1.23 percent to 111.96 points as investors cashed out from recent sharp gains in second liners.