Five-pronged strategy for Singapore equities

INVESTORS in Singapore are beginning to fine-tune their annual playbooks for the equity market as signs of clarity emerge in what has been a foggy macroeconomic terrain.

According to RHB Research, one of the key drivers now is positioning for medium-term structural change rather than simply chasing near-term momentum.

The research house notes that amid rising macroeconomic uncertainty, 2025 profit estimates for most Straits Times Index (STI) sectors have been revised lower over the past three to six months.

The Singapore benchmark index collectively flagged that near-term earnings visibility is more constrained than investors might assume, it states in its report.

The report further highlights that the telecommunications sector stands out positively, with earnings upgrades in contrast to other segments.

Despite the downgrades for 2025, RHB Research points to a brighter horizon for 2026.

“Despite the downward revisions to 2026 forecasts, 2026 profit growth expectations have strengthened, reflecting a lower base and improving medium-term visibility,” it asserts.

For the index as a whole, consensus estimates show earnings for the STI now projected at 7.5 % growth in 2026 and 7.2 % in 2027. These forecasts signal a meaningful shift in the tone of the market’s outlook.

In terms of sector rotational strategy, RHB Research expects that industrials, telecommunications and real estate will see their profit contributions to the index expand, while the financial sector – particularly banks – will see its relative share shrink as earnings growth in the other sectors outpaces that of financials.

This calls for investors to reassess their sector weightings rather than simply maintain benchmark allocations.

On a broader level and excluding real estate investment trusts (REITs), RHB Research forecasts market-cap-weighted year-on-year earnings per share growth of 1.2 % for 2025 (a downgrade from an earlier estimate of 1.6 %).

For 2026, the number is revised upward to 6.7 % from 5.88 %.

Meanwhile, for REITs under its coverage (excluding US REITs) RHB Research expects distribution per unit (DPU) growth of 1.6 % in 2025, up from 1.3 %; and 4.2 % in 2026. These numbers set the scene for how investors might allocate capital across asset types.

Five themes

Given that backdrop, RHB Research outlines five distinct themes for navigating the Singapore equity market.

The first theme is to continue building exposure in Singapore-listed REITs (S-REITs).

RHB Research remains “overweight” on S-REITs based on the US Federal Reserve’s easing bias.

It expects a 25 basis points (bps) rate cut next month and a further 50 bps in 2026.

Lower funding costs and improved DPU visibility are seen as catalysts, while valuation remains supportive, with the sector trading near book value and offers an estimated yield of 5.7 % for 2026.

RHB Research notes that policy and liquidity tailwinds such as the SG$5bil Equity Market Development Plan (EQDP), new index inclusions and steady Singapore dollar liquidity are cited as additional supports.

In terms of preference, the research house ranks industrial as superior, followed by office, retail, overseas and hospitality. Its top picks include the likes CapitaLand Ascendas REIT, CapitaLand Integrated Commercial Trust, Frasers Centrepoint Trust, Suntec REIT and AIMS APAC REIT.

RHB Research’s second theme focuses on high-dividend yield stocks outside the REIT universe.

It observes that the Singapore market “continues to provide among the region’s highest forward dividend yields of 5.1% (as of Oct 16, 2025), coupled with a relatively stable currency.”

The third theme emphasises structural policy-driven flows into Singapore equities.

RHB Research underscores that “policy-led initiatives are set to deepen market liquidity and broaden investor participation in Singapore equities”.

The Monetary Authority of Singapore (MAS) has deployed an initial S$1.1bil under the EQDP to seed funds that invest in Singapore-listed securities, including initial public offerings and secondary offerings.

RHB Research argues that newer indices – such as the SGX iEdge Singapore Next 50 Index and its variants tracking mid-cap companies – are likely to attract incremental flows and help narrow valuation gaps and broaden market depth.

In the fourth theme, RHB Research highlights forthcoming regulatory and corporate governance initiatives expected to support value-creation among smaller Singapore-listed companies.

It notes that Chee Hong Tat, National Development Minister and Deputy Chairman of the MAS, has outlined three key elements: strategic excellence in leadership, clearer communication, and stronger communities of directors, management and investors. Companies that adopt such capabilities and transparency may unlock value.

Within RHB Research’s coverage universe, it identifies specific opportunities such as CDL Hospitality Trusts (CD) and RFMD Group (RFMD) as potential value-unlockers, with CD’s low valuation multiples seen as disconnected from its earnings delivery and RFMD maybe able to optimise its balance sheet and raise dividends if no major acquisitions materialise in the near term.

Finally, RHB Research stresses that given the cloud over export-heavy sectors from global trade policy and tariff risks, the domestic economy offers some stabilising features.

“A supportive fiscal policy backdrop, monetary policy flexibility, subdued inflation, and strong sovereign fundamentals,” it says.

The research house advocates for a defensive tilt through high-quality, low-volatility names in relatively resilient sectors: consumer staples, land transport, healthcare, telecommunications and domestic REITs exposed to industrial assets.

Companies with stable cash-flows, non-cyclical demand and high earnings visibility are seen as the prudent way to cover for volatility.

In summary, RHB Research’s framework suggests a blended strategy: leveraging the yield and structural tailwinds of S-REITs, hunting for high-dividend non-REIT names, deeper exposure into mid- and small-cap via policy-driven market development, selective value-unlock plays in the corporate governance arena and a defensive anchor via resilient domestic-centric sectors.