Singapore equities have performed exceptionally well so far this year with a total return of around 30%. — The Straits Times
SINGAPORE: Singapore could see more capital inflows in 2025, with the stock market poised for another year of outperformance as investors turn defensive and favour the safe haven amid uncertainties over new United States policies.
New measures to revitalise the Singapore stock market could also boost trading liquidity and lift valuations as much as 20%, narrowing the discount to global peers, said Wilson Ng, an equity analyst at Morgan Stanley Asia.
The Singapore equities market has performed exceptionally well so far in 2024, with a total return of around 30%.
It has outperformed nearly all markets in the Asia-Pacific region and most major markets globally.
“The year 2025 could be another fruitful year for Singapore against a relatively challenging regional market backdrop,” said the equity analyst.
Policy shifts from US President-elect Donald Trump’s incoming administration could have far-reaching implications for global markets, including in the Republic, he said.
“Given a more challenging outlook for Asia-Pacific equities in the year ahead, coupled with uncertainties over new US policy, Singapore could benefit from capital flows pivoting more defensively in favour of safe havens,” added Ng.
When investors take a defensive stance, they take on as little risk as possible and choose stable investment products or markets that have proven themselves over the years.
Goldman Sachs’ chief Asia-Pacific strategist Timothy Moe likes Singapore for its defensive market and good dividend yields.
He has a “constructive” view on the three local banks – DBS, UOB and OCBC – which account for more than 50% of the benchmark Straits Times Index’s (STI) total value.
All three banks delivered good profit growth in the third quarter ended Sept 30, 2024: DBS’ net profit grew 15% from a year ago to S$3.03bil; UOB’s net profit jumped 16% year-on-year to S$1.61bil; and OCBC’s net profit climbed up 9% to S$1.97bil.
The banks also offer attractive dividend yields of 5% to 6%.
“In an environment where you got somewhat higher for longer interest rates, maybe steeper yield curve, that’s typically better for banks in general and we think that’s true also for Singapore banks,” Moe said.
Macquarie Capital’s head of Asean research Jayden Vantarakis has a target of 4,000 for the STI in 2025.
It is currently trading at around 3,751.
He likes the three banks’ strong capital positions.
He noted that DBS and UOB have shown intentions to return surplus capital to shareholders, and that the ball was in OCBC’s court to follow suit.
He has raised his price target for DBS to S$45.50, UOB to S$39.40 and SOCBC to $16.48.
Among the Singapore-listed real estate investment trusts (REITs), or S-REITs Vantarakis’ preference is for industrial REITs.
He listed Keppel DC REIT, a data centre REIT, and CapitaLand Ascendas Reit as the two preferred REITs.
Among the telecommunications companies, the analyst likes Singtel.
“Potential sector consolidation is a positive thematic for the entire sector in 2025.
“We expect Singapore’s four player telco market will consolidate into three,” Vantarakis said.
Besides Singtel, the other mobile network operators in Singapore are StarHub, M1 and Simba Telecom. — The Straits Times/ANN
