Structural reforms herald new era

SINGAPORE’S equity market is drawing renewed attention as investors look for a rare combination of stability, income and long-term growth in an increasingly unpredictable global environment.

While geopolitical tensions and shifting monetary policy continue to cloud the outlook for many markets, structural reforms and improving liquidity are reshaping the investment case for Singapore equities.

According to Eastspring Investments, the market is moving beyond a cyclical rally into a new phase supported by stronger fundamentals, broader participation and evolving opportunities across sectors and company sizes.

Eastspring Investments chief investment officer Vis Nayar says Singapore’s equity market is no longer being driven solely by traditional blue-chip dividend plays, with structural reforms beginning to widen the opportunity set.

“Singapore’s equity market is entering a new phase. The Equity Market Development Programme (EQDP) is deepening liquidity, broadening participation and improving market access,” he says.

“At the same time, structural reforms, coupled with changing market composition, are reshaping the investable universe. With these changes, historical valuation ranges may no longer serve as a reliable benchmark for assessing today’s opportunity set,” he notes in his foreword to the group’s white paper on Singapore equities

The EQDP, launched in 2025, has become one of the biggest catalysts for the market’s revival.

Eastspring Investments reckons that the Straits Times Index (STI) has climbed sharply over the past two years, supported not only by the programme but also by Singapore’s reputation as a regional safe haven.

However, the investment manager argues that the rally is proving more durable than a simple liquidity-driven rebound.

It says the gains are underpinned by broad-based earnings growth, shareholder-friendly capital management, a strengthening Singapore dollar and a market advance that extends well beyond the largest index constituents.

That broader participation is changing how investors should assess Singapore equities.

Four pillars

Eastspring Investments highlights that the market’s resilience rests on four structural pillars.

“Four levers – dividend strength, robust corporate governance, an adaptive mindset and a consistent policy framework – help shape the Singapore equity market’s resilience, particularly in how it absorbs market shocks through the depth of drawdowns and speed of recoveries,” Nayar points out.

“These levers continue to evolve, reinforcing Singapore’s ability to navigate a more uncertain and volatile global environment, and increasing the Singapore equity market’s relevance for investors,” he adds.

Income remains one of Singapore’s strongest attractions.

Eastspring Investments forecasts a dividend yield of 4.9% in 2026, among the highest in Asia. Since 2015, dividend returns have consistently contributed between 3% and 6% annually, helping cushion market declines during periods of volatility.

Banks, telecommunications companies (telco) and real estate investment trusts (REIT) continue to dominate the dividend landscape, together accounting for more than 60% of total market dividends.

Their recurring cash flows and regulated business models provide investors with dependable income, although Eastspring Investments note that sector concentration also exposes payouts to policy changes and funding conditions.

The investment manager points to the Monetary Authority of Singapore’s temporary cap on bank dividends during the Covid-19 pandemic as an example of how policy interventions can influence shareholder returns, even though payouts later normalised as profitability recovered.

Strong corporate governance

Beyond dividends, Eastspring Investments believes Singapore’s corporate governance standards remain a key competitive advantage.

Singapore ranks among the region’s strongest markets for governance, following years of tighter disclosure standards, stronger enforcement and enhanced protection of minority shareholders after earlier governance issues involving several China-linked companies.

Even so, concentrated ownership structures and relatively limited shareholder activism mean careful stock selection remains essential, creating opportunities for active managers able to engage closely with company management.

Nayar believes the next phase of market performance will increasingly come from outside the traditional large-cap universe.

“Looking ahead, the opportunity set is increasingly expanding beyond large-cap names, and into the small and mid-cap segment, where inefficiencies remain more pronounced. This also means that the market is shifting from being income-led to one where capital growth will play an equally important role in driving returns,” he notes.

He adds that many international investors continue to benchmark Singapore incorrectly alongside other Asean markets despite its distinct institutional strengths, currency characteristics and risk profile.

“The market’s visibility with global allocators should rise over the next two to three years as EQDP broadens the investor base. To fully capture the opportunities presented by this new era in the market, investors will need to adopt an approach rooted in disciplined valuation, thorough fundamental analysis, and proactive engagement,” he highlights.

Eastspring Investments says this approach becomes particularly important among smaller companies where research coverage remains uneven and direct engagement can uncover opportunities overlooked by the broader market.

Singapore’s economic evolution is also creating fresh investment themes.

Eastspring Investments says the economy has steadily shifted from export-led industrialisation towards services, technology, innovation and advanced manufacturing. This transition aligns closely with Singapore’s 2026 Economic Strategy Review, which prioritises artificial intelligence adoption, sustainability and deeper global integration.

As more companies pursue these growth areas, the listed market could become increasingly diversified beyond its traditional concentration in banks, telcos and REITs.

Robust capital raising

Another important development is the changing nature of capital raising on the Singapore Exchange (SGX).

Rather than relying primarily on initial public offerings (IPO), listed companies are increasingly returning to the market through secondary fund raisings to finance expansion, improve liquidity and support execution pipelines.

From 2017 to April 2026, SGX-listed companies raised almost S$90bil through equity issuance, with secondary fund raisings consistently exceeding proceeds from IPOs.

Although annual listings slowed between 2020 and 2024, activity has begun recovering. Around 16 companies listed in 2025, raising approximately S$3bil, while the first four months of 2026 generated five listings and close to S$1bil in proceeds.

The improving average daily trading values since the introduction of the EQDP indicate stronger liquidity, while recent listings have attracted high-quality institutional investors.

The next pipeline is expected to feature sectors including digital infrastructure, advanced manufacturing, healthcare, consumer technology and the green economy, creating recurring funding opportunities as businesses mature.

These observations broadly align with Overseas-Chinese Banking Corp’s (OCBC) investment outlook.

The financial group remains positive on Singapore equities, citing attractive valuations, healthy dividend yields and continued benefits from the EQDP. It notes that the STI trades at around 15.1 times earnings while offering a dividend yield of about 4.2%.

OCBC also highlights Singapore’s strong governance, resilient economy and stable Singapore dollar as factors continuing to attract safe-haven inflows despite geopolitical uncertainty and inflation concerns.

The bank sees additional upside as more asset managers participate in the EQDP and initiatives such as the SGX-Nasdaq dual-listing framework encourage new listings.