Once seen as a small, “unexciting” market for income-seeking investors, Singapore equities have taken a sharp turn upwards, surging to record highs, with major banks and market watchers signaling that the rally is just getting started. Building on its strong gains from last year, the benchmark Straits Times Index has advanced nearly 10% so far in 2025 , outperforming the U.S. benchmark S & P 500 and several regional peers. Singapore’s stock market is drawing interest from institutional and retail investors alike, helped by a potent combination of equity market reforms, rising dividends, foreign fund inflows and country’s enduring appeal as a geopolitical safe haven, said market watchers. “We are in a bull market. And I’m going to tell you today that this is still a baby bull,” said Thilan Wickramasinghe, head of research at Maybank. “There’s still a lot more to run.” The STI is currently up more than 23% since its April 9 low, data from LSEG showed. What’s driving the market? According to Aberdeen’s investment director of Asian equities Xin-Yao Ng, Singapore’s stock surge is rooted in its “safe-haven status,” buoyed by a strong currency, ample fiscal reserves, and a shareholder yield that’s better than several developed markets. High dividends are a major draw, said Ng. According to CLSA research, Singapore’s average dividend payout ratio of 60% is second only to Australia’s at 74% in Asia-Pacific according to CLSA Research. The Southeast Asian nation’s market appeal is also lifted by how the Singapore dollar has been strengthening against the greenback, appreciating about 6% year to date, with Jefferies reportedly forecasting that the currency could reach parity with the dollar in the next five years. For foreign investors, an appreciating local currency like the Singapore dollar can significantly boost returns. When overseas funds buy Singaporean assets, their gains are eventually converted back into U.S. dollars, and a stronger Singapore dollar increases the dollar value of their returns. Beyond yield, their is also macroeconomic stability, Ng added. Singapore’s second-quarter GDP rose 4.3% year on year, up from 4.1% in the first quarter, signaling resilience in services and domestic demand. While telecommunications and the utilities sectors have led the early stages of this rally, Maybank’s Wickramasinghe noted that institutional money was just beginning to rotate into other segments including real estate investment trust or REIT offerings and consumer stocks. Singapore Telecommunications — known as Singtel — a dominant telecoms player, is up more than 28% year to date. Utilities firms Sembcorp Industries and Union Gas Holding have gained 38% and 18%, respectively, so far this year. “For the institutions, it’s been a very, very early stage of getting into this market,” he said. “That’s why I’m saying there is still a lot more for this market to run,” Wickramasinghe said. He also flagged the impact of government firepower and infrastructure investment. “We haven’t seen a construction boom like this in 10–15 years … that’s going to help so many companies, not just the big caps, but the small- and the mid-caps as well.” In real terms, 2025 construction demand — value of construction contracts to be awarded — is forecast between 35 billion and $39 billion Singapore dollars, 0.3% to 11.7% higher than pre-COVID levels in 2019, according to the Building and Construction Authority . A more recent driver is also the Monetary Authority of Singapore’s equity market development program or EMDP, which aims to inject $5 billion Singapore dollars into local small- and mid-cap stocks to revitalize market liquidity. The first tranche of $1.1 billion Singapore dollars has already been allocated to three institutional fund managers, who are required to co-invest their own capital and adopt active trading strategies — a move designed to lift market liquidity and trading activity. Re-rating prospects JPMorgan now expects the STI to hit 4,500 under its base case — and 5,000 in a bullish scenario — upgrading its outlook on the back of falling interest rates, SGD strength, and capital inflows. Hitting 5,000 would mean a more than 20% jump from current levels. “Singapore equities still offer one of the best combinations of yield, currency strength, and potential inflows among ASEAN markets,” the bank wrote, upgrading the real estate sector and tipping small- and mid-caps as likely beneficiaries in the second half of the year. Morgan Stanley shares the optimism, calling 2025 a turning point for the Singapore market. “Singapore embarked on an unprecedented campaign of equity market reforms … this could ignite significant interest and confidence in the Singapore stock market globally,” the bank said. It forecasts a re-rating in valuations, with price-to-book ratios potentially rising from the current 1.7 to 2.3 by 2030 — comparable to Australian and Taiwanese markets. Higher P/B valuation multiples imply investors expect the market to generate stronger returns. The investment bank’s bull case sees the MSCI Singapore index doubling within five years, fueled by IPO inflows, digital infrastructure expansion, and AI-led productivity gains. “Now is the time to build exposure to this dynamic and enterprising market,” Morgan Stanley said. Liquidity trap warnings Not all investors are leaning into the rally. Citibank warned of a potential “liquidity trap” as money piles into small-cap stocks in anticipation of EMDP deployment. “Retail investors are selling large-cap index stocks and are skewed towards less liquid SMIDs [ small and mid-size companies] ,” Citi said. Even though the MAS initiative may allow for further liquidity injections through 2025, the bank cautioned investors against chasing lower quality small- and mid-caps at the risk of “being left holding the proverbial bag if or when the liquidity party ends.” Morgan Stanley also noted structural risks including tariff-induced slowdowns, U.S.-China rivalry, and the possibility of Singapore losing market share to rival hubs such as Hong Kong, Tokyo, or the United Arab Emirates, if reforms stall or new listings remain elusive.
