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December 2025
Positive on Singapore equities for 2026
Despite the strong performance in 2025, the Singapore market is still not expensive based on the price-to-earnings ratio of the STI. We have an overweight call on the Singapore stock market and remain positive on its medium-term outlook.
Carmen Lee
Head, OCBC Investment Research,
OCBC
Within equity markets in Asia ex-Japan, the Singapore stock market is one of the bourses in the region that we prefer.
Even though the Singapore bourse has a reputation for being a relatively steady and stable market amongst its regional peers, during the US and Singapore earnings season in November 2025, there was an uptick in market volatility.
Market volatility after strong gains is normal
With strong gains since the US Liberation Day tariffs in April 2025, concerns emerged over high valuations, especially amongst big US technology companies – which caused market jitters.
Profit taking by investors, largely amongst high technology companies, triggered nervousness in the market as growth stocks bore the brunt of the selling pressure, while dividend yielding stocks were relatively unscathed.
However fundamentally, corporate earnings were resilient in the third quarter of 2025 despite the higher trade tariffs and on-going geopolitical tensions. S&P 500 companies reported higher third quarter earnings versus consensus forecasts.
All in, the S&P 500 index did well in the first eleven months of 2025 despite trade tensions and the US government shutdown.
The US equity market is not the only one that did well in the first eleven months of 2025. Most major equity indices also posted good gains.
Regional equity markets have also brushed aside the impact from the trade tariffs as regional bourses posted good gains since the lows in April 2025.
Outlook is still positive
Looking ahead, we are sanguine in the outlook for equities as history shows that markets can continue to rise when the US Federal Reserve cuts rates in a non-recessionary environment. We do not anticipate a US recession.
Closer to home, the outlook for the Singapore market remains positive. The benchmark Straits Times Index (STI), covering the top-tier companies on the Singapore bourse, has posted strong gains so far in 2025.
The newly created iEdge Singapore Next 50 Index (NTR), which covers the next 50 biggest companies after the STI, has also done well.
Based on information from the Singapore Exchange, retail investors have contributed significantly to the strong market performance.
In the third quarter of 2025, trading volume on the Singapore market was up 33% quarter-on-quarter or 40% year-on-year. This showed that the market was well supported by buying interest as seen in the sharp rise trading volumes.
Government initiatives have boosted interest in the Singapore bourse
The Singapore bourse’s strong performance was also supported by several other factors. For one, optimism was also sparked off by the Singapore government’s initiatives to support the equity market under the Equity Market Development Programme (EQDP). Other factors included a strong Singapore dollar, low domestic interest rates, attractive market valuations and good dividend payouts.
Under the EQDP, one of the key initiatives unveiled by Monetary Authority of Singapore (MAS) is for S$5 billion to be dispersed to several appointed Singapore-based asset managers to invest in Singapore equities. In July 2025, the MAS announced the first batch of asset managers, dishing out an initial amount of S$1.1 billion. The next batch of asset managers to receive EQDP funds should be announced by the end of 2025.
Another key development for the Singapore bourse will be the “Value Unlock” programme for listed companies. Measures to be announced in November should include grants and an expanded suite of engagement activities.
These measures have collectively spurred interest in small and mid-capitalisation companies (SMID) boosting their share prices. This re-rating drew more retail investors back into the Singapore market. With the renewed interest in the Singapore bourse, many under-valued stocks saw significantly higher trading volumes as their share prices rallied.
Low domestic interest rates are a boon for Singapore blue chips
Domestic interest rates in Singapore have fallen sharply and this is another key reason to buy into Singapore blue chips, which can offer good average dividend yields of just under 5%.
Bottomline: Singapore stock market is still inexpensive
Despite the strong performance in 2025, the Singapore market is still not expensive based on the price-to-earnings ratio of the STI.
For the reasons above, we have an overweight call on the Singapore stock market and remain positive on its medium-term outlook.
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