Liquidity boost for Singapore

SINGAPORE’S equity market looks set to turn the corner in the second half of the year (2H25), buoyed by a shift in global trade tensions and a timely injection of liquidity from policymakers. For investors seeking value, yield and quality, the city-state is once again looking like a worthwhile bet.

The optimism comes as the Monetary Authority of Singapore (MAS) prepares to roll out its S$5bil Equity Market Development Programme (EQDP), aimed squarely at boosting liquidity and breathing life into non-index counters.

The move comes just as the United States appears to have pulled back from a full-blown tariff war with China, creating a more stable backdrop for regional markets.

According to UOB Kay Hian (UOBKH) Research, these factors combined have prompted “a more constructive view” on Singapore equities.

“In light of the US backing down from a full-scale tariff war with China, as well as the injection of liquidity from the MAS in 2H25, we have become more bullish on the Singapore market,” the brokerage states.

Year-to-date, the Straits Times Index (STI) has already outperformed many of its Asian peers by between three to 16 percentage points, a performance UOBKH Research attributes to its “prevalence of blue-chip defensive stocks” that have strong cash flow generation and relatively high dividends, which should see them through most tariff-related market turbulence and exit in a strong position.

Higher target

In response to the improved environment, the brokerage has revised its year-end 2025 STI target to 4,054, up from 3,720 previously.

“Our 2025 STI target is based on our forecast 1.2% earnings growth for the index stocks and implies a price-earnings multiple of 13.4 times which we do not view as stretched for a Singapore market that is long on quality defensive names,” UOBKH Research explains.

Large-cap favourites include CapitaLand Ascott Trust, CapitaLand Integrated Commercial Trust, First Resources Ltd, Keppel Ltd, Oversea-Chinese Banking Corp Ltd, SATS Ltd, Sea Ltd, Sembcorp Industries Ltd, Singapore Telecommunications Ltd and Yangzijiang Shipbuilding (Holdings) Ltd, reflecting a preference for stability, income and strategic positioning across sectors.

But the real buzz is around Singapore’s mid- and small-cap names, which UOBKH Research believes will benefit most from the EQDP.

“With the imminent disbursement of S$5bil to selected fund managers in 2H25, we believe that our selection of 12 small-to-mid-cap companies could see heightened interest, given their quality management, earnings growth, robust business models and largely domestically-focused revenue streams.”

The brokerage’s top picks in this space include Centurion Corp Ltd, China Sunsine Chemical Holdings Ltd, Comfortdelgro Corp Ltd, CSE Global Ltd, Food Empire Holdings Ltd, Frencken Group Ltd, Hong Leong Asia Ltd, OTS Holdings Ltd, PropNex Ltd, Sheng Siong Group Ltd, SIA Engineering Company Ltd and Valuemax Group Ltd.

Importantly, “in our universe of small-mid-cap coverage, 19 stocks are in a net cash position with their net cash ranging from 6%-73% of their market capitalisation,” UOBKH Research highlights.

Shot in the arm

The EQDP, which MAS hopes will enhance market liquidity and support Singapore’s fund management ecosystem, will see S$5bil channelled into selected asset managers.

The funding is drawn from MAS’ own investment portfolio, as well as the Financial Sector Development Fund.

“We understand that the final proposals will be submitted to the MAS on May 30 with the shortlist of fund managers to be announced in the third quarter of 2025 (3Q25) and funds likely to be deployed as soon as 4Q25 in our view,” UOBKH Research states.

Crucially, this programme focuses on non-index stocks, with a preference for actively managed strategies.

UOBKH Research notes that real estate investment trusts will not be preferred, in line with MAS’ stated goal of bolstering trading interest in under-represented segments of the market.

But why now?

According to UOBKH Research, the Singapore stock market has waned in quality in the past 10 years with lower daily trading volume seen over this time, as well as fewer listed stocks.

So far in 2025, the market has seen four initial public offering – matched by four delistings – with 14 more companies announcing plans to go private. Increasingly, Singaporean firms have opted to list elsewhere, including Nasdaq, Bursa Malaysia and the Taiwan Stock Exchange.

The EQDP is part of a broader push to reverse this trend.

“Given Singapore’s goal to be one of Asia’s key financial hubs, it was imperative for the authorities to bolster the local market and compete since regional financial centres have implemented various strategies to enhance their own markets in the past few years,” UOBKH Research observes.

Still, the road ahead isn’t without obstacles.

“We note that there was an absence of any role for market makers which we believe is integral in maintaining liquidity and efficiency in a well-functioning stock market,” it says.

It also cautions that this initiative must not be a one-off.

“Going forward, it will be critical for the authorities to ensure that the S$5bil is not a one-off and that as the market grows, it will be able and willing to continue to lend its support.”

Valuation-wise, Singapore remains compelling.

UOBKH Research notes that the STI’s valuations are not stretched at present, trading at 2025 price-earnings and price-to-book ratios of 12.2 times and 1.3 times, respectively, and paying a yield of over 5.5%.

These levels represent meaningful discounts both to long-term averages and to regional benchmarks, it adds.

With capital on the way, risks easing and valuations attractive, Singapore may finally be ready to turn investor apathy into genuine enthusiasm.