Singapore stocks close to all-time highs. What's ahead?

What happened? 

The Singapore market had a strong run in 2024, with the Straits Times Index (STI) rising 16.9%—its best annual performance since 2017.

Since crossing the 3,800 mark in December, the STI is now just a few percentage points away from reaching a new all-time high. 

As a background, the index last hit its record closing high of 3,899.29 in October 2007, with an intraday peak of 3,906.15 on 11 October 2007.

Despite the overall 16.9% gain in 2024, performance varied widely across the STI’s 30 constituents. 

While half of the stocks ended the year in positive territory, the other half saw declines.

Earlier, we shared that the top three best performing stocks were Yangzijiang Shipbuilding, DBS and SATS, with gains of 30% and above in 2024. 

On the other hand, Singapore REITs took a hit and underperformed the STI, with Mapletree Logistics Trust and Frasers Logistics & Commercial Trust amongst the worst-performing in the STI last year. 

In this article, we will find out the prospects for Singapore stocks in 2025, and some of the key themes to look out for. 

Is there more upside for the STI in 2025? 

Going into 2025, brokers have broadly been cautiously optimistic about the prospects of returns for the STI. 

RHB and DBS have a fairly similar year-end target for the STI at 3,940 and 3,950 points respectively, implying a modest ~4% upside. 

For RHB, their STI target is based on a target P/E of 11.3x applied to 2026 Earnings Per Share (EPS), where the target P/E is -1 standard deviations from its forward P/E since January 2008, given expectations of moderating earnings growth into 2025 and 2026. 

This is largely similar to DBS, which has used a target P/E of 11.8x applied to 2026 EPS in deriving its target for the STI. 

UOB Kay Hian adopted a more positive position, expecting the STI to close at 4,115 by year end, implying 9% upside.  

UOB Kay Hian applied a 12.4x P/E and 1.3x P/B target valuation to derive its top-down STI target of 3,840. From a bottom-up perspective, it has used target prices for the individual STI constituent stocks in arriving at a target of 4,390. 

Collectively, this brings UOB Kay Han's aggregate forecast for the STI to 4,115 by end 2025. 

Key themes to look out for 

#1 - Higher for longer interest rates 

The US Federal Reserve projections for rates in 2025 indicate fewer cuts than previously forecast, reflecting their concerns about ongoing inflation. 

The Fed is now projecting two 25 bps interest rate cuts in 2025, down from four 25 bps interest rate cuts based on Fed officials’ forecasts back in September 2024.

While the three local banks in Singapore have had a record financial performance based on their third quarter 2024 financial results thus far, a “higher for longer” interest rate environment could be beneficial to the banks’ earnings, as higher net interest margins could further boost net interest income.

Meanwhile, stronger market sentiment and increased assets under management could also bolster banks’ non-interest income. 

Read also: DBS, UOB and OCBC near all-time highs. Worth buying at 5% dividend yield?

#2 - Corporate restructuring 

Over the past years, corporate restructuring has been a key theme for the Singapore market. 

Notable examples include the restructuring of CapitaLand to CapitaLand Development and CapitaLand Investment in 2021 and the creation of Seatrium from Keppel’s Offshore & Marine division and Sembcorp Marine in 2023. 

This theme continued in 2024, with SingPost announcing the completion of the strategic review of the group to “Orientate to Growth as a Tech-driven Pure-play Logistics Enterprise”.

Hongkong Land announcing its plan to exit the “Build to Sell” business and pivot towards an asset light fund management model, growing AUM from US$40 billion today to US$100 billion by 2035.  

2025 could see a continue trend towards restructuring to unlock value. As highlighted by Phillip Securities, stocks to watch include: 

• Keppel: disposal of Rigco assets
• Thai Beverage: Sale of stake via trade sale or IPO in BeerCo
• Olam: Disposal of stake in Olam Agri or de-merger of Olam Food
• SingTel: Looking to partly crystallise the value of its Bharti or Intouch stakes
• SingPost: Completion of the disposal of its Australian and property assets 

#3 - Equities Market Review Group recommendations

On 2 August 2024, the Monetary Authority of Singapore (MAS) announced that a Equities Market Review Group has been set up to recommend measures to strengthen equities market development in Singapore. 

Since then, two workstreams have been established:

1. The Enterprise and Markets workstream will focus on ideas to encourage listings, increase investor participation, improve trading liquidity and facilitate fair valuation for listed equities.
2. The Regulatory workstream will study ideas to streamline the regulatory framework, improve the listing process, enhance the effectiveness of our disclosure-based regime, and strengthen corporate governance standards, investor access and recourse.

In a speech delivered by Deputy Prime Minister Gan Kim Yong at the Singapore Exchange (SGX) Group’s 25th anniversary ceremony on 2 January 2025, he called for the crowding in commercial capital on a sustained basis – such as institutional wealth, individual investors and family offices – as a key measure to stimulate market interest and maintain trading liquidity.

Importantly, he also highlighted the importance of broadening liquidity, particularly for smaller counters with market caps between S$500 million and S$3 billion. 

While the review will take up to 12 months, i.e. by August 2025, the Review Group and workstreams aim to announce their recommendations in phases, so that the proposed measures can be implemented as soon as possible. 

What would Beansprout do? 

Despite the strong performance of the Singapore market in 2024, there appears to be a few reasons to be remain positive.

For example, the valuation of the Singapore market remains inexpensive. The dividend yield of the STI remains above 4.0%, above the Singapore T-bill yield and peers in the region. 

This is largely supported by the dividend yields of the Singapore banks, which offer a dividend yield of 5% on average. 

Some of the key themes we will keep a look out for include the impact of higher for longer interest rates, corporate restructuring, as well recommendations from the Equities Market Review Group. 

If you are looking to gain diversified exposure to the Singapore market in a simple way, find out how the STI ETFs offer exposure to Singapore blue chip stocks. 

If you are keen to look for stock opportunities in the Singapore market, explore our screener of dividend-paying stocks that have upside to consensus target price and a dividend yield of above 3%.

If you are keen to learn how a professional fund manager looks for opportunities in the Singapore market, read our recent interview with the manager of the Nikko AM Shenton Thrift Fund.

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