SINGAPORE (Bloomberg): Singapore’s stocks have outperformed the world over the past month as their traditional strengths of high dividend yields and resilient balance sheets get a lift from a "Goldilocks” economic backdrop.
Robust growth fueled by tech exports, alongside productivity gains that are helping keep inflation in check, has boosted corporate earnings, prompting JPMorgan Chase & Co. to use the "Goldilocks” label. The nation’s benchmark equity index has surged 23% to a series of record highs this year, following a similar gain in 2025.
Fund managers say the rally has room to run. Jupiter Asset Management Ltd. believes the nation’s expanding economy and strengthening currency will underpin further equity gains, while Eastspring Investments points to structural themes such as wealth management and artificial intelligence-related infrastructure as driving inflows.
"Singapore is gradually evolving from a traditional dividend and defensive market into a dividend-plus-growth market,” said Ernest Chew, head of Asean equities at BNP Paribas Asset Management in Kuala Lumpur. "We still value its defensive characteristics, but increasingly see more opportunities for capital appreciation alongside income.”
Singapore equities are heading for a fifth straight quarter of gains, their longest winning streak in a decade, as the market’s combination of growth and stability attracts institutional investors seeking shelter from volatility driven by global conflicts and swings in the AI trade.
The main contributors to the rally in Singapore’s benchmark Straits Times Index have been its three biggest banks: DBS Group Holdings Ltd., Oversea-Chinese Banking Corp. and United Overseas Bank Ltd. They have each set a series of all-time highs in recent months with investors particularly attracted by their exposure to Singapore’s thriving wealth management industry.
Over the past month, all three lenders reported second-quarter earnings that beat analysts’ forecasts. OCBC has been the standout, with shares climbing 61% this year, making it the best performer in the 30-stock gauge.
Singapore’s banks haven’t been alone in attracting investor interest. Expectations of higher-for-longer global interest rates have bolstered financial firms around the world, with the MSCI World Bank Index rising about 20% this year to a record.
Adding to the appeal is a positive long-term outlook for the Singapore dollar. The currency has appreciated almost 6% against the greenback in the past three years as investors have gravitated to haven assets amid the global geopolitical turmoil. Singapore’s monetary authorities use the local dollar as their main tool to manage the economy and have been guiding it stronger against a basket of trading-partner currencies to temper inflation.
Jupiter Asset Management is among those still bullish.
"We’ve been significantly overweight Singapore for many years, with over 16% of our funds invested in Singapore today versus a benchmark weighting of around 3%,” said Sam Konrad, a fund manager for Asian equities at Jupiter Asset in Singapore. "We think it is one of the most attractive developed markets in the world, yet strangely is often ignored, or underappreciated, by investors.”
JPMorgan meanwhile raised its forecast for the Straits Times Index to 6,500 in a note published Aug. 11, implying a gain of about 13% from Friday’s close of 5,743.59.
"A Goldilocks economic backdrop should continue to underpin earnings-per-share growth and empower fiscal room,” JPMorgan analysts including Khoi Vu in Singapore wrote in the note. "While valuations have broken out of the averages, we believe this level will be sustained as the STI reprices closer to other developed markets driven by high yield and stable currency.”
Others are more wary. Fidelity International says it has turned more cautious as share prices have exceeded earnings growth.
"Valuations are at the highest since the global financial crisis and the index is also the most expensive within Asean,” said Sui Chuan Yeo, a portfolio manager at Fidelity in Singapore. "The fundamental economic drivers remain uncertain, especially considering the global economic and geopolitical vicissitudes. We have been incrementally trimming our Singapore exposure.”
Valuations have become more stretched after the recent rally, with the Straits Times Index trading at more than 16 times its 12-month forward earnings, more than two standard deviations above its 10-year average.
There’s also concern about the increasingly heavy weighting of banks in the benchmark gauge. DBS, OCBC and UOB currently account for nearly 60% of the total market capitalization of the Straits Times Index, up from just 38% in July 2020, making the gauge less representative of the economy and more fragile.
Eastspring Investments says further gains are still likely even after the three-year rally.
"Singapore equities have rerated meaningfully, but valuations remain reasonable relative to many developed markets,” said Bryan Yeong, a portfolio manager at Eastspring in Singapore. "While upside is likely to be more selective after the strong rally, we still see opportunities in companies with earnings visibility, improving returns and shareholder value-unlock potential.”
--With assistance from Marcus Wong.
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