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September 2025
Reasons to stay invested in Singapore equities
This year marks the 60th year since Singapore gained its independence on 9 August 1965.
Over the past 60 years, the country has undergone a remarkable transformation from a swampland to a thriving metropolis.
A host of activities, discounts, promotions and special celebrations have been planned for this year as the nation comes together to celebrate this significant milestone.
Retail outlets, grocery stores, restaurants and even places of interests have special packages, and many companies have also planned special events.
We provide here a list of reasons why investors should continue to stay invested in Singapore to welcome the decade and participate in the nation’s prosperity.
Singapore’s success in the past 60 years was no pure luck but rather a carefully planned series of developments and investments that shifted Singapore’s focus from textile and then electronics manufacturing in the 1960s and 1970s, to a digital nation now.
Looking ahead into the coming decade, the combination of regional growth and rising affluence will bring about more opportunities here and in this region.
Singapore’s stability is often underappreciated
With rising global uncertainty – from elevated geopolitical tensions and higher trade tariffs – stability is increasingly going to be more valuable.
Singapore’s economic stability is often over-stated, but at times it seems to be underappreciated.
In a climate of rising geopolitical tensions, one of the Singapore’s key investment merits is its economic stability. This is sharpened through years of strategic government initiatives and policies; well-established housing and well-connected infrastructure; and a transparent and robust financial system.
The political landscape is stable, with no change to the leading political party since independence. This has allowed for the continuation of several long-term initiatives to enhance infrastructure and develop core skills to meet changing needs.
Safe haven status
The recent re-rating of the Singapore stock market was largely fuelled by its safe haven status as seen from the good gains by defensive stocks.
The benchmark Straits Times Index (STI) has provided a stable growth of 3% per annum over the past 20 years. Singapore’s safe haven status has not only attracted a constant stream of foreign investments into key industries and recently into its stock market, but it also means that the island will remain a key wealth hub as more family offices and assets flow into the country. Strong foreign investments reinforce the country’s appeal to foreign companies and is also reflective of the confidence of foreign investors despite elevated global uncertainties.
In Asia, the wealth and credit card business is growing. Asia is going to be home to more and more middle-class families due to rising affluence. It is also estimated that Asia will account for more than 50% of the world’s wealthiest people and this is a key indicator for the region. Based on a study by Knight Frank, the Asia Pacific region is projected to account for nearly half of all new high net-worth individuals (HNWI) between 2025 and 2028. This will be supported by digital transformation happening throughout Asia, policies encouraging entrepreneurship, higher regional trades and investments.
High dividend yields – a key differentiator
As a wealth hub and with funds looking for attractive yields in an environment that is likely to see lower interest rates, Singapore listed companies have consistently offered one of the highest dividend-yield in this region and globally. The strong Singapore Dollar also means that foreign investors investing in local equities in Singapore Dollar terms have enjoyed both good currency gains as well as steady dividend income. With the prohibitive property measures for foreign investors buying into local residential properties, Singapore equities offer a compelling alternative for investors holding Singapore Dollars. At current levels, the average dividend yield for the STI is about 5%. This is attractive for investors looking for stable and sustainable long-term returns.
In the Singapore Treasury bills market, the average auction amount in 2025 was S$7.4 billion versus applications of S$17.5 billion or a cover ratio of 2.4x. Demand far outstrips supply. A recent auction for example, closed with a cut-off yield of 1.79% (auction results on 17 Jul 2025). As an indication, the cut-off yield was an average of 3.85% in 2023, 3.46% in 2024 to around 2.52% so far this year. However, these rates are still higher than the averages seen pre-Covid levels of around 0.58% in 2020 and 0.37% in 2021. Meanwhile, the US Dollar has weakened against Singapore Dollar this year by about 6.1%.
The compounded average growth rate for the STI in the last 20 years was 3%. The average dividend yield during the same period was 4%, giving total return of 7.0% – a decent rate of return for the past 20 years.
Global tariffs and geopolitical tensions
In the past few months, the volatile Middle East situation and trade tariffs have risen and ebbed, capturing the dynamic and fluctuating global developments and changes. These have added uncertainty to the investment climate and created both opportunities and challenges. While certain countries are more impacted than others, Singapore has been comparatively less impacted versus the rest of the world. Nevertheless, higher tariff rates for regional countries will still have some spillover effects on certain Singapore companies. However, there is a need to distinguish between noises and signals.
Equity market reforms and initiatives
The Equities Market Review Group established by the Monetary Authority of Singapore (MAS) provided a progress update recently: an initial tranche of S$1.1 billion will be placed with three asset managers under the S$5 billion Equity Market Development Program (EQDP). The MAS will appoint more asset managers in the second tranche by 4Q2025. Additionally, the MAS will also provide S$50m under the Grant for Equity Markets (GEMS) schedule to strengthen equity research and listing support. We expect quality small/mid-cap stocks, as well as S-REITs, to be potential beneficiaries of these developments. A key risk, in our view, is investors overcrowding into certain small/mid-cap names; if liquidity cannot be maintained over the longer term, especially after the funds are fully deployed, small/mid-cap counters trading at frothy valuations without supportive underlying fundamentals could be at risk of sharp drawdowns or profit-taking activity.
Why Singapore equities matter for your portfolio
Singapore equities allow the investor to gain exposure to a healthy economy known for its strong governance, political stability and robust financial regulations. Singapore equities provide geographic diversification, and relative defensiveness during times of uncertainties and this will help to reduce overall portfolio risks. The attractive dividend yields for many Singapore stocks are appealing to income-focused investors, while discerning investors could discover stocks that offer growth opportunities. Exposure to the Singapore dollar through Singapore equities adds currency diversification benefits and a hedge against volatility in other currencies.
President Donald Trump finally unveiled on 3 April 2025 a blanket tariff on 10% on all imports into the US as well as reciprocal tariffs on several countries. We believe this is not the end of road for tariffs. There is still room for negotiation, retaliation and further potential escalation.
Our analysis of tariffs has spanned from blanket tariffs, like what we got on 3 April 2025, to reciprocal tariffs, to sector specific tariffs. The ASEAN economies we cover were hard hit by tariffs as we had expected but the magnitude of the hit is much larger than we anticipated. This is partly based on the US computation of the tariffs imposed on it by trading nations resulting in hefty tariff rates and subsequently discounted differential tariffs.
Both are dramatic in their magnitude. These will have implications for growth, inflation, and fiscal and monetary policies. Admittedly, there are still some uncertainties. This pertains to the room to retaliate and/or negotiate. Although US Treasury Secretary Scott Bessent warned against retaliation, the strategy adopted by trading partners remains to be seen.
Significant downside risks to growth
Within ASEAN, Cambodia, Laos, Vietnam and Myanmar bear the bigger brunt of tariff increases, in terms of the magnitude of higher differential tariffs. This is followed by Thailand, Indonesia, Malaysia and the Philippines. India’s differential tariffs of 27% seems marginal compared to the long list of trade restrictions mentioned in the 2025 National Trade Estimate (NTE).
The blanket tariffs will come into effect on 5 April 2025, while reciprocal tariffs will come into effect on 9 April 2025. There are still some exemptions under the reciprocal tariff arrangements, including those items that are already under investigation including copper, pharmaceuticals, semiconductors, lumber articles, certain critical minerals, energy and energy products. There is a risk of tariffs on these products or higher blanket tariffs down the road.
The sharp escalation of tariffs rates, if realised, will have a hard-hitting impact on economic growth through the export channels. Based on import elasticities and our back of the envelope calculations, Vietnam will be hardest hit with GDP growth, followed by Thailand and Malaysia while Indonesia and India could be more insulated. Philippines, by our estimates, will be least impacted.
Central banks more inclined to support growth
We now expect regional central banks to become more supportive of growth, particularly in 2H25. We are adding rate cuts to our Vietnam, Thailand, Indonesia and India forecasts. We expect the State Bank of Vietnam and Bank of Thailand to cut by an additional 50 basis points (bps) in 2H25, while Bank Indonesia and Reserve Bank of India will likely cut by an additional 25bps on top our current forecast of 25bps. This implies an additional 50bps in rate cuts by end-2025. Although the growth impact is limited for Philippines, we expect that the country’s central bank, Bangko Sentral ng Pilipinas (BSP), will take the opportunity to lower rates further to mitigate downside risks. We, therefore, expect a cumulative 50bps in rate cuts in 2025.
Singapore: Still cautious
The silver lining is that 10% is relatively mild compared to China, Vietnam and many of the other ASEAN countries. Singapore’s resilience will depend on how well it adapts to shifting trade flows, potentially benefiting from companies diversifying away from the more heavily tariffed countries, while managing broader economic uncertainties and financial market volatility. But the indirect impact is through knock on effects through our role as trading, logistics and financial hubs. For Singapore, the top three NODX (non-oil domestic export) markets in 2024 are China (17%), US (15.8%) and Malaysia (8.7%). Moreover, there was no specific sectoral tariffs on semiconductors or pharmaceutical industries for instance. But the caveat is we have to wait and see what happens in the coming days and weeks.
For now, it is too early to say what the tariffs mean for Singapore. But the odds may be slightly skewed towards an easing of policy by Monetary Authority of Singapore.
Vietnam: Hardest hit
We reduce our 2025 GDP growth forecast to 5.0% YoY versus our previous forecast of 6.2%. Vietnam’s exports to the US totalled US$119.4bn in 2024, which can be reduced by as much as 35-40%, by our estimates. The impact on economic growth, however, is not straightforward particularly for 2025 considering that 1Q25 GDP growth was already relatively resilient at 6.6% YoY, by our estimates. Moreover, with semiconductors exports still exempted from the reciprocal tariffs’ announcements, the hit to exports will likely be reduced.
The authorities have been negotiating with the US in terms of trying to reduce tariffs and raising imports from the US. While the outcomes are still uncertain, we expect the authorities to remain focussed on expediting infrastructure spending and diversifying trade partners. The higher reciprocal tariffs on most goods, and likely impending tariffs on semiconductors, suggests that fiscal and monetary policies will have to be nimble. We now expect the State Bank of Vietnam to reduce its policy rate by 50bps this year compared to our previous forecast of no change.
Thailand: Next in line
The reciprocal tariff rates imposed on Thailand is 37%. Vuttikrai Leewiraphan, permanent secretary at the Ministry of Commerce, estimated that exports could be hit by US$7-8bn if tariffs on Thailand’s exports to the US were raised by 11%. This suggests a significant impact. However, with certain key items still exempt from tariffs (for the moment), we expect the hit to growth to remain significant at 0.8 percentage points (pp). We, therefore, reduce our 2025 GDP growth forecast to 2.0% from 2.8%.
While the authorities have been transparent about their intent to negotiate with the US, and the Thai authorities have agreed to import certain goods from the US, the outcome of further negotiations and the fate of the semiconductor tariffs remain uncertain. We now expect the Bank of Thailand (BoT) to reduce its policy rate by 50bps in 2025 to further bolster downside risks to growth, with the government continuing to pursue supportive fiscal policies.
Malaysia: Waiting for semiconductor tariffs
We reduce our 2025 GDP growth forecast to 4.3% YoY from 4.5% given the impact of weaker external demand as most of Malaysia’s trading partners are hit by tariffs. The relief for Malaysia’s exports, for the moment, is that semiconductor exports are still exempt from the reciprocal tariffs. This accounts for approximately a third of total exports to the US. Given the nature of the reciprocal tariff announcements, it seems like only a matter of time before semiconductor exports are slapped with tariffs. This will have a more significant impact on Malaysia’s GDP growth. The authorities have said that they will not pursue retaliatory tariffs and opt for negotiations.
While the stance of fiscal and monetary policy may not make dramatic shifts, it will likely lean towards becoming more growth supportive. The government plans to rationalise RON95 prices in a bid to reduce fuel subsidy expenditures. The government has stated that low-income groups will not be impacted. We see rising risks that this implementation could be delayed particularly if tariffs on semiconductor exports to the US are announced before 2H25.
If this price change materialises, Bank Negara Malaysia will be more inclined to look through supply-side shocks, but this will impact the timing of potential rate cuts to mitigate downside risks to growth. BNM could open the door to rate cuts in late 2025 or early 2026. If the price change is delayed, BNM could ease sooner.
Indonesia: Surprisingly hard hit
The reciprocal tariff rate of 32% is substantial and one of the most surprising, by our estimates. The economy is already hard hit by perceived uncertainties around domestic policy direction and cloudy fiscal policy outlook given weaker-than-expected revenue collections and budget reallocations. The higher-than-expected tariff rate will exacerbate these risks. We reduce our 2025 GDP growth forecast to 4.7% from 4.9% and expect that the worsening of current account deficit (1.4% of GDP in 2025 versus 0.6% in 2024) will put further pressure on the economy to maintain strong capital inflows even as the outlook for the latter remains uncertain.
The government and central bank will need to be nimble in their policy approach to prevent a further backsliding of sentiment. The government will have to ramp up communications and improve its perceived image on policy making.
Bank Indonesia (BI) has tied further rate cuts to the stability of the Indonesian Rupiah as the downside risks to growth becoming increasingly obvious. It is worth noting that the anecdotal activity data during the Eid holidays have been lower compared to 2024. We expect BI to now cut by a cumulative 50bps in 2025, compared to 25bps previously. However, the timing for BI rate cuts needs to become more proactive and less tied to currency outcomes to enable more timely growth support.
Philippines: Better by comparison
The reciprocal tariffs at 18% is the lowest in the region and the impact on GDP growth will also be concomitantly lower. Like Malaysia, Philippines exports to the US is biased towards semiconductors, which are still exempt from tariffs at the moment.
We expect GDP growth to be slightly lower at 5.9% YoY in 2025 versus 6.0%, previously. We expect BSP to follow on with two 25bps rate cuts for the rest of 2025, particularly as headline inflation remains well within BSP’s 2-4% target range.
India: In the middle but limited impact
India’s tariff rate of 27% looks more manageable compared to regional peers. However, there will be a modest hit to growth of 0.2pp considering weaker external demand. As a predominantly domestic demand driven economy, the impact of higher tariffs from the US will likely have sector specific impacts.
From a policy perspective, further simplification of non-tariff trade measures and continued negotiations with the US will likely keep the Indian economy in good stead. The Reserve Bank of India (RBI) has increased banking sector liquidity to allow for further rate cuts, in our view. We expect the RBI to reduce its policy rate by two 25bps rate cuts for the rest of 2025.
FDI investment flows could change
The reciprocal tariffs on ASEAN and India will hurt the ‘China+1’ strategy that has benefited the region for some years now. Although China’s tariff rate is still higher at 54% (reciprocal 34% plus previously imposed 20%), the elevated tariffs on Cambodia and Vietnam suggest that the allure of shifting production to these economies is reduced compared prior to the tariffs. It will, however, take time for global supply chains to adjust and in the interim, firms will either need to bear the brunt of the tariffs or pass it onto the consumer, complicating the picture for price pressures.
In the interim, the ASEAN markets will remain vigilant of lower goods coming in from China. China’s surplus with the ASEAN markets increased significantly in 2024 and we do not rule out further measures from these economies to protect against the inflows of goods at reduced prices from China.
