Singapore roars into the new year

SINGAPORE equities look set to surprise on the upside in 2026 as a confluence of policy, liquidity and technology reshapes how investors price certainty in a noisy world. The market enters 2026 with momentum building rather than fading, and the set-up suggests re-rating rather than mere grind higher.

That is the core message coming through the latest strategy view from Maybank Investment Bank Group Research (Maybank IBG).

The research house states that the outlook for Singapore’s equity market this year is positive due to a rare combination of macro resilience, structural reforms and valuation support.

In a global environment marked by political risk and uneven growth, it sees Singapore carving out a differentiated position. This backdrop, it says, could underpin a widening “certainty premium” versus volatile global peers.

Investment themes

Four big themes anchor the call. First is politics and policy.

Singapore is framed as offering stability and credibility amid fast fragmenting geopolitics, with strong domestic resilience amplifying its safe-haven appeal.

As capital looks for places where rules are predictable and fiscal levers are credible, Maybank IBG expects this certainty premium to widen and “accelerating safe-haven flows” to follow.

Second is reform at the top end of the market. Over the past five years, re-ratings in Singapore have been driven more by earnings growth than by multiple expansion. That contrasts with other markets, where valuations have often done the heavy lifting.

With returns on equity still below developed-market peers, Maybank IBG sees room for catch-up as capital management improves.

It points to renewed large-cap reforms that can “accelerate capital returns”, lifting dividends meaningfully.

“Dividend per share in the next three years should spur 9% compounded annual growth rate versus 5% in past decade,” it notes, a material shift for income-focused investors.

The third theme sits with small and mid-sized companies.

Despite gains last year, it says, small- and mid-capitalisation companies trade at one time price-to-book-value,which is 30% to 50% below peer markets.

“Earnings are accelerating. Implementing Monetary Authority of Singapore reforms and the Equity Development Programme should drive significant value unlocking. Similar reforms in North Asia have delivered 40% re-ratings,” Maybank IBG notes.

Technology forms the fourth pillar.

Singapore is seen as leading artificial intelligence adoption regionally, not just in experimentation but in execution.

As use-cases scale, the expectation is that operating leverage kicks in, lifting margins and productivity “across sectors”.

The payoff, according to the analysis, is that “earnings risk is on the upside”.

Rally ride

All this feeds into a more ambitious index call.

Maybank IBG has raised its end-2026 Straits Times Index (STI) target to 5,600 points.

This is pegged to plus two standard deviation, five-year mean price-to-earnings ratio (PE) of 17.1 times.

That compares with developed markets further along the reform curve trading closer to 21 times earnings.

The valuation argument matters because Singapore’s set-up today is framed as structurally different from the 2010–2020 period, when low rates and a benign global order kept uncertainty in check.

Earnings growth underpins the optimism.

The research flags STI earnings accelerating to 3.6% year-on-year in 2026, supported by 2.8% gross domestic product growth. It also highlights that the third quarter of 2025 saw the lowest earnings disappointments in two years, a trend it expects to persist.

Liquidity is the accelerant. Enhanced retail participation, faster initial public offerings and falling interest rates are seen “dialling up risk appetites” and acting as key catalysts for re-rating.

Valuations are not cheap on a simple backward look. The STI trades at 14.7 times PE and 1.6 times price-to-book (PB), above long-term averages.

However, Maybank IBG cautions against leaning too heavily on a 10-year mean that misses the last sustained bull market from 2003 to 2008, when PB ratios peaked at two times.

Relative value strengthens the case: the index trades at a 33% discount to Japan and 25% to Korea, markets that have undergone similar reforms to those now underway at Singapore Exchange. On a PB basis, it sits at a 10% discount to China and a 72% discount to the United States, while offering a dividend yield 256 basis points above its peer average.

Preferred sector

Sector positioning flows naturally from the macro view.

Real estate investment trusts are tipped to benefit from falling rates through lower funding costs and stronger asset values.

Banks are expected to see improving credit growth, with artificial intelligence-driven productivity gains helping sustain returns on equity and capital returns.

Internet names offer structural growth with improving monetisation, while telecommunications appeal for defensive cash flows and rising data infrastructure demand. Small and mid-sized stocks “stand out in value”, combining earnings momentum with reform catalysts.

A critical enabler is liquidity, particularly from retail investors.

As part of regulatory reforms, there is “a decisive shift towards encouraging more retail investor liquidity”. Measures range from smaller board lot sizes and modernised custody frameworks to improved user experience and expanded services such as fractional trading.

Safeguards remain, with direct accounts retained and voting rights protected. The push matters because, by Maybank IBG’s estimates, retail participation in Singapore is below 20%, lagging regional peers.

Early signs are encouraging. The Singapore Catalist Board, home to smaller-cap listings and a key venue for retail activity, has seen market velocity jump to 46% in November 2025 from 15% at the start of the year.

The Singapore Exchange Mainboard also shows improvement, with velocity rising to 45% from 32%. Increased retail participation is framed as a self-reinforcing cycle that draws in institutions, boosts liquidity and supports valuations.

Overlaying this is a revamp of market supervision and listings. A shift to a disclosure-based regime, streamlined reviews under a single regulator, proportionate post-listing supervision and recalibrated trading alerts aim to cut friction without weakening enforcement.

The expectation is that lighter-touch processes, combined with stronger surveillance, lift confidence and activity – and, ultimately, help Singapore equities earn a higher “average” multiple in the years ahead.