Complete guide to Singapore blue chip stocks

What you'll learn:

• What are Singapore blue chip stocks?
• Why you should look at Singapore blue chip stocks?
• Which were the best performing Singapore blue chip stocks in 2021?
• Which Singapore blue chip stocks should you add to your watchlist?
• How you can buy Singapore blue chip stocks?

TL;DR

• Blue chip stocks in Singapore are companies listed on the Singapore stock exchange that are well established and seen to be financially sound.
• Investors may choose to buy into these Singapore blue chip stocks as they are perceived to carry lower risk compared to smaller companies.
• Blue chips stocks in Singapore that did well in 2021 include Singapore Press Holdings, DBS, UOB and Yangzijiang Shipbuilding.
• In 2022, some of the Singapore blue chip stocks to add to your watch list include Sembcorp Industries, SATS and City Developments.

What are Singapore blue chip stocks?

As an investor in the stock market, one would often come across new terms that may not sound immediately familiar.

One of the terms often used in the Singapore stock market is blue chip stocks. 

You might be wondering what does this truly mean? What would I be investing in when I buy into Singapore blue chip stocks? 

Fret not, as this is something that Beansprout did not understand when we started on our investing journey as well. 

But having asked around, it became clear that the term “blue chip” came from the game of poker, where it is seen as the chip that is most valued. 

Likewise in the stock market, blue chip stocks in Singapore refer to well-established companies that seen to be financially sound. 

These are often the largest companies listed in Singapore with the highest market capitalisation. 

In other words, investors perceive these companies to be relatively safe as they have a strong market position and are well known in the public. 

This brings us to the next point about why an investor should consider investing in Singapore blue chip stocks. 

Why should I look at Singapore blue chip stocks?

As we shared in our article “What you need to know about how to invest in Singapore”, it is important to have an investment plan before you start. 

After all, some of us may like to take risks, while others may prefer investing in stocks that are less volatile. 

Here’s Singapore blue chip stocks are seen as being relatively stable due to their sheer size. 

This doesn’t mean that they are not subjected to market downturns and share price weakness. 

It’s just that compared to a smaller-sized firm operating in the same industry, they are generally seen to be less risky. 

This might make blue chip stocks in Singapore suitable for those who do not want their portfolios to be subjected to too much movements. 

As many of these companies have established business models and cash flow generative operations, they may also pay attractive dividends to investors.  

Hence, they can be considered for investors looking to build a passive income stream to fund their retirement.

Lastly, we have been constantly reminding investors that there is a need to diversify your portfolios to make sure that we do not have overly high exposure to any single stock or sector.

If your portfolio is currently predominantly in the US market, or even crypto, then investing in Singapore blue chip stocks might be one of the ways that you would be able to diversify your portfolio.  

Which were the best performing Singapore blue chip stocks in 2022?

One of the ways we can narrow down the list of Singapore blue chip stocks, is to look at the Straits Times Index (STI). 

The STI is an index that tracks the performance of the top 30 companies listed on the Singapore exchange (SGX). 

The STI outperformed all global stock benchmarks in total returns generated (inclusive of dividends and in US Dollars. 

In fact, there were some blue chip stocks in the STI which saw gains of close to 84%!  Let’s take a look at what are these blue chip stocks driving the strong performance of the STI. 

3 best performing Singapore blue chip stocks in 2022

#1 - Yangzijiang Shipbuilding (SGX: BS6)

Earlier in 2022, the Chinese shipbuilder spurn-off and listed its investment arm, Yangzijiang Financial Holding. This move was cheered by the market as it created a pure-play shipbuilding-focused entity. 

Soon after, Yangzijiang Shipbuilding secured its maiden contract win of two 175,000 CBM LNG carriers, a vessel type which has traditionally been predominantly served by Korean shipbuilders. 

Entering the new year, Yangzijiang Shipbuilding is confident of leveraging on the continued demand for LNG carriers and capturing a larger market share in this sector.

#2 - Sembcorp Industries (SGX: U96)

Investors have taken positively to the company’s brown to green transition to become a leading provider of sustainable solutions. 

As one of the leading power generation companies in Singapore, Sembcorp Industries has seen its profit grow with higher electricity prices in Singapore. 

Sembcorp Industries has also made meaningful strides in decarbonisation following its announced sale of Sembcorp Energy India Limited (SEIL) for about S$2.1 billion. 

SEIL is one of the largest independent power producers in India, operating two coal-fired plants with a capacity of 2.6GW.

#3 - Keppel Corporation (SGX: BN4) 

The company is targeting to improve on its quality of earnings with higher recurring income as part of its Vision 2030.

Since October 2020, Keppel has monetised assets worth close to S$4.4b billion. This would include the sale Keppel Marina East Desalination Plant to Keppel Infrastructure Trust. 

It also looking to divest its Offshore and Marine business to Sembcorp Marine with the transaction potentially completed in 1H23. 

Moving into 2023, Keppel looks to continue to grow its renewables, clean energy and sustainable urban renewal businesses.

Keppel is also confident of achieving its target of divesting S$5 billion of assets by the end of 2023. 

Which are the Singapore blue chip stocks I should add to my watchlist in 2023?

This year has been an interesting one so far, with rapid increase in the Fed funds rate having affected financial markets worldwide.

Regardless, there are blue chip stocks that we should definitely be paying attention to.

DBS Group Holdings Ltd (SGX: D05)

In 2022, DBS Group saw net profit grow by 20% to S$8.19 billion, marking a record performance year for them.

This was arguably due to them benefiting from the rising interest rate environment, which boosted its net interest income and margin.

Their strong financial performance bears testament to their resilience as a franchise, and is also bolstered by their active expansion in digital and technological capabilities in recent years.

As part of a digital transformation effort that began in 2014, DBS’ renowned banking operation is organised around four key pillars: augmented banking, open banking, automation banking, and intelligent banking.

Today, the bank is in a good position to scale the business by leveraging on digital and data innovation, driving long-term growth and delivering value to shareholders.

Learn more about what to expect for Singapore banks after their record first quarter earnings.

Singapore Airlines Ltd (SGX: C6L)

Singapore Airlines, also known as SIA, has benefitted from the massive increase in passenger traffic after a long period of COVID-19 travel restrictions.

They boasted S$628 million in net profit in their third quarter (October to December) of 2022, a more than seven-fold increase from the same period in the preceding financial year.

Their total revenue also increased by 8 percent from the second quarter to S$4.85 billion.

This was attributed to strong demand, with passenger capacity recovering up to eighty percent of pre-COVID levels in December.

SIA is also in place to emerge as a 25.1 percent owner of Air India after a merger with its Vistara joint venture.

If SIA is able to continue its strong passenger business numbers in the near-term period, it may be able to increase its capacity closer to pre-COVID levels.

This is especially considering how travel passenger traffic in the Asia Pacific region is likely to continue gaining momentum in 2023, as travel restrictions have mostly been lifted.

If you have an optimistic outlook in the aviation sector, SIA might be a good blue chip stock to keep on your watchlist.

Learn more about what to expect for SIA after its highest profit in 76 years.

Singapore Telecommunications Limited (SGX: Z74)

Singtel enjoyed a 7% year-on-year increase in revenue as well as a 10% year-on-year increase in net profit in Q2 2023.

Their strong performance saw them announcing a special dividend of S$0.05 per share, payable in two tranches in December 2022 and August 2023.

Singtel maintains a dominant presence in Singapore as well as in other emerging markets, making for a large and diversified customer base and a steady stream of revenue.

They currently serve over 770 million mobile customers in 21 countries, including Australia, Indonesia, Philippines, Thailand, India, and others.

On Singtel’s Investor Day 2022, the company announced its aims to improve their return on invested capital (ROIC) to high-single digits in the mid-term.

This will be done through capturing growth opportunities through digitalisation, 5G innovation, and a continued focus on cost optimisation amongst others.

If Singtel is able to deliver a decent dividend yield in the near term, it will continue to be a good blue chip stock against the backdrop of market turbulence in the foreseeable future.

Take the next step

As Singapore blue chip stocks are generally more liquid than companies with a smaller market capitalisation, they are also fairly accessible to most investors. 

Retail investors would be able to invest in these companies through a stock brokerage account. Not sure how to get access to one? Check out our article “How to start investing in Singapore”