Singapore shares closed 2.51 percent lower on Thursday, tracking overnight drop in U.S. equities after Federal Reserve Chairman Ben Bernanke confirmed market fears that it may begin reducing its stimulus later this year as the economy improved.

U.S. stocks tumbled more than 1 percent on Wednesday, and the benchmark 10-year U.S. Treasury yield surged 17 basis points to 2. 355 percent, its highest in 15 months, while the dollar advanced broadly on the back of rising yields.

Bernanke said on Wednesday the U.S. economy is expanding strongly enough for the Federal Reserve to begin slowing the pace of its 85 billion U.S. dollars monthly purchases of Treasuries and mortgage-backed securities, with the goal of ending it in mid-2014. But he also noted the central bank would withhold from tapering if economic conditions deteriorated.

Phillip Securities Research said the market will price in the prospect of liquidity being sucked out of the markets -- but at the same time remember it is predicated on a stronger U.S. economy, so private sector money, which has largely missed the last 4 years of bull market, could come piling back in."

"We could see the index continuing its slide with resistance pegged at 3,230 points," SIAS Research said.

DBS Group Research said the Straits Times Index's recent low at 3,100 points should hold with support at 3,145 and 3,160.

Singapore's benchmark Straits Times Index sank 80.53 points to close at 3,133.26. Trading volume was 2.10 billion shares worth 1. 84 billion Singapore dollars (1.44 billion U.S. dollars). Decliners heavily outnumbered advancers 416 to 62, while 467 stocks finished unchanged.

Singapore Airlines dropped 1.5 percent to close at 10.05 Singapore dollars. It has placed a firm order for 30 Airbus A350- 900 aircraft worth 8.6 billion U.S. dollars at list prices, with options for 20 more of the jetliners.

Mapletree Logistics Trust fell 1.8 percent to end at 1.12 Singapore dollars. It announced that it has signed an agreement with Oakline Co Limited for the acquisition of property The Box Centre in South Korea.

Among the top gainers, Jubilee Industries Holdings jumped 50.9 percent to close at 25.5 Singapore cents, while Jardine Matheson became one of the top losers by falling 4 percent to close at 59. 72 U.S. dollars. (1 U.S. dollar = 1.28 Singapore dollars) Endi