Singapore Stock Market: 2025 Performance & 2026 Outlook

by | Dec 31, 2025 | Uncategorized | 0 comments

Executive Summary

Singapore’s equity market delivered exceptional performance in 2025, with the Straits Times Index (STI) surging over 21% from 3,800 to above 4,600 points. This case study examines the drivers behind this remarkable bull run, analyzes the 2026 outlook, and evaluates solutions implemented by regulators and their broader market impact.

Case Study: The 2025 Bull Market

Market Performance Overview

The Singapore Exchange experienced a transformational year in 2025, marked by sustained momentum across multiple market segments:

Benchmark Performance

  • STI rose from approximately 3,800 to 4,600+ points (21% gain)
  • Multiple all-time highs recorded throughout the year
  • iEdge Singapore Next 50 Index climbed from 1,150 to above 1,450 points (26% gain)
  • Both blue-chip and mid-cap segments participated in the rally

Sector Leaders

The rally was broad-based but particularly strong in specific sectors:

Mid-Cap Winners:

  • CNMC Goldmine: +316% (benefiting from soaring gold prices, reaching $1.35 in October)
  • Food Empire: +145% (instant coffee maker capitalizing on regional demand)
  • CSE Global: +135% (integrated technology systems for mission-critical operations)

Construction Boom:

  • OKP Holdings: +297%
  • Hong Leong Asia: +152%
  • Koh Brothers and Pan United: both +107%
  • Driven by extensive property and infrastructure development projects across Singapore

Blue-Chip Strength:

  • ST Engineering: +81%
  • Jardine Matheson: +64%
  • DFI Retail Group: +72%
  • Hongkong Land: +57%
  • Keppel and Singtel: both approximately +50%

Banking Sector:

  • DBS Bank: +28% (reached $56.36, hit record highs)
  • OCBC Bank: +19% (closed at $19.76, also achieved record levels)
  • Two of three major banks posted all-time highs

Key Catalysts

Several interconnected factors drove the 2025 bull market:

1. Monetary Authority of Singapore (MAS) Reforms

In response to longstanding industry concerns about market depth and liquidity, MAS unveiled comprehensive reforms:

  • $5 billion equity development fund pooled with selected fund managers to invest in SGX companies, particularly small and mid-cap stocks
  • Simplified listing requirements to attract more initial public offerings
  • Enhanced legal recourse against errant companies and directors
  • Lighter regulatory oversight approach by the stock exchange regulator
  • Government funding support for listed companies to improve investor relations
  • Financial support for brokerages to expand research coverage of local stocks

These measures addressed systemic issues that had constrained market development for years.

2. Interest Rate Environment

As global interest rates began normalizing and softening, capital that had been parked in fixed income instruments flowed back into equities. Singapore’s attractive dividend yields became particularly appealing in this environment.

3. Corporate Actions and Strategic Restructuring

Multiple high-profile corporate actions enhanced market activity:

  • Centurion Corporation spun off Centurion Accommodation Reit
  • LHN hived off its co-living arm, Coliwoo
  • Yangzijiang Financial carved out Yangzijiang Maritime Development
  • Lum Chang spun off Lum Chang Creations on Catalist
  • DFI Retail sold Cold Storage and Giant supermarkets to Macrovalue for $125 million
  • Hongkong Land offloaded MCL Land to Sunway Group for $739 million
  • Hongkong Land sold Marina Bay Financial Centre Tower 3 stake to Keppel Reit for $1.45 billion

These transactions demonstrated active portfolio management and unlocked value for shareholders.

4. Safe-Haven Status

Amid global economic uncertainty and geopolitical tensions, Singapore’s political stability, strong regulatory framework, and transparent legal system attracted flight-to-quality capital flows.

5. Tourism Recovery

Singapore recorded 14.3 million international visitors from January to October 2025, up 3% year-over-year. The Singapore Tourism Board expected full-year arrivals of 17 to 18.5 million, with tourism receipts reaching between $29 billion and $30.5 billion, surpassing pre-pandemic levels.

2026 Outlook: Expectations and Challenges

Analyst Consensus

Market participants anticipate a “high-quality year” for Singapore equities in 2026, characterized by sustainable growth rather than valuation expansion. DBS has set an end-2026 STI target of 4,880 points, implying moderate gains of approximately 6% from year-end 2025 levels.

Growth Projections

Economic Fundamentals:

  • Singapore GDP growth expected to moderate to approximately 1.8% in 2026, down from 4.0% in 2025
  • This is below the mid-point of the Monetary Authority of Singapore’s 1-3% forecast range
  • STI earnings growth projected to accelerate to 8.8% in 2026
  • Banking sector expected to deliver positive earnings growth of about 5.4%

Valuation Metrics:

  • Forward P/E ratio around 13.9x for FY2026 (reasonable by historical standards)
  • Dividend yields approximately 4.9% for 2026 (attractive in a lower interest rate environment)
  • These metrics suggest the market remains fairly valued with income appeal

Thematic Investment Opportunities

1. Logistics and Supply Chain Infrastructure

As global supply chains become more complex and resilient, logistics infrastructure is expected to remain in high demand:

  • Mapletree Logistics Trust
  • Frasers Logistics and Commercial Trust
  • AIMS Apac Reit
  • CapitaLand Ascendas Reit
  • Samudera Shipping
  • GKE Corp
  • Cosco Shipping International

2. Data Centers and AI Infrastructure

Continued artificial intelligence spending is driving demand for data center capacity:

  • Keppel DC Reit
  • Digital Core Reit
  • NTT DC Reit (listed in July 2025)

Singapore’s strategic position as a regional data hub and its reliable infrastructure make these assets particularly attractive.

3. Tourism and Hospitality

With tourist arrivals projected to reach 19 million in 2026 (approaching the pre-pandemic peak of 19.1 million in 2019) and spending levels already exceeding 2019 levels:

  • Genting Singapore (operator of Resorts World Sentosa)
  • Banyan Tree (hotel operator seeing increased institutional interest)

The family behind Far East Organization raised its stake in Banyan Tree to 7.14% from 6.93% in late December, signaling confidence in the sector.

4. Special Dividend Candidates

Companies that monetized significant assets in 2025 may reward shareholders:

  • City Developments: After selling its 50.1% stake in South Beach for $835.29 million
  • Keppel: Promised to reward shareholders from ongoing asset monetization, including the sale of M1

5. Offshore and Renewable Energy

Higher investments in offshore wind infrastructure position several companies favorably:

  • Seatrium (major offshore infrastructure player)
  • Marco Polo Marine (vessel charterer with good growth trajectory)
  • ASL Marine (positive analyst sentiment)
  • Yangzijiang Maritime (recently listed with strong fundamentals)

6. Technology and Precision Medicine

UltraGreen.ai, which develops AI-powered fluorescence imaging technology for precision surgery, represents the type of innovative, high-growth company that could benefit from Singapore’s push to attract quality listings.

Risk Factors

Despite the positive setup, several headwinds could constrain performance:

1. US Tariff Policies

Potential trade restrictions or tariff escalations could impact Singapore’s trade-dependent economy and the earnings of export-oriented companies.

2. US Equity Market Volatility

Correlation with US markets means that significant corrections in American equities could spill over to Singapore despite strong local fundamentals.

3. Interest Rate Trajectory

While rates are expected to normalize, any unexpected tightening or prolonged elevated rates could pressure valuations, particularly for REITs and high-dividend stocks.

4. Economic Slowdown

The projected deceleration in GDP growth to 1.8% suggests a more challenging operating environment for companies, potentially constraining earnings growth.

5. Geopolitical Tensions

Regional conflicts, particularly relating to trade routes and supply chains, could disrupt Singapore’s position as a regional business hub.

Solutions: Regulatory and Market Reforms

MAS Strategic Initiatives

The Monetary Authority of Singapore’s 2025 reform package represents the most comprehensive effort to revitalize the local equity market in recent years. These solutions address long-identified structural weaknesses:

1. Capital Deployment Initiative ($5 Billion Fund)

Problem Addressed: Insufficient institutional capital focused on small and mid-cap Singapore stocks, leading to poor liquidity and wide bid-ask spreads.

Solution Implementation: MAS pooled $5 billion with selected professional fund managers specifically mandated to invest in SGX-listed companies, with particular focus on overlooked small and mid-cap names.

Mechanism: Fund managers receive allocations with clear investment mandates, performance benchmarks, and reporting requirements. This ensures capital is deployed systematically rather than opportunistically.

2. Listing Requirement Simplification

Problem Addressed: Burdensome listing requirements discouraged quality companies from choosing SGX, leading to a pipeline problem for new listings.

Solution Implementation: Streamlined documentation requirements, reduced minimum capital requirements in certain circumstances, and accelerated approval timelines for qualified applicants.

Expected Outcome: More attractive listing venue for regional growth companies, particularly in technology, healthcare, and consumer sectors.

3. Enhanced Legal Recourse

Problem Addressed: Investors lacked confidence due to perceived difficulty in pursuing legal action against corporate malfeasance.

Solution Implementation: Strengthened statutory remedies, clearer pathways for derivative actions, and enhanced director liability provisions.

Investor Impact: Greater confidence in corporate governance standards and reduced perceived “Singapore discount” in valuations.

4. Lighter Regulatory Touch

Problem Addressed: Perception that SGX regulation was overly prescriptive, creating compliance burdens that deterred listings without commensurate investor protection benefits.

Solution Implementation: Shift toward principles-based regulation focusing on outcomes rather than process, with clearer guidance on materiality thresholds.

Balance Achieved: Maintains high standards while reducing unnecessary bureaucracy.

5. Investor Relations Support

Problem Addressed: Many smaller listed companies lacked resources for professional investor relations, leading to poor price discovery and undervaluation.

Solution Implementation: Government funding available to listed companies for hiring IR professionals, producing quality investor materials, and organizing investor engagement events.

Market Development Impact: Better-informed investors lead to more efficient pricing and reduced volatility.

6. Research Coverage Expansion

Problem Addressed: Declining analyst coverage of smaller SGX-listed companies created information asymmetry and discouraged institutional investment.

Solution Implementation: Financial support for brokerages to expand research teams and cover previously uncovered stocks.

Information Ecosystem Impact: More comprehensive research universe enables better investment decisions and attracts broader investor base.

Corporate Governance Enhancements

Beyond MAS initiatives, SGX itself implemented stricter corporate governance codes:

  • Enhanced disclosure requirements for related-party transactions
  • Mandatory quarterly reporting for larger companies
  • Strengthened independent director requirements
  • Improved minority shareholder protection mechanisms

Market Infrastructure Improvements

Technological and operational enhancements supported the reform agenda:

  • Faster settlement cycles
  • Improved trading system stability
  • Enhanced market surveillance capabilities
  • Better integration with regional trading platforms

Impact: Short-Term and Long-Term Effects

Immediate Market Impact (2025)

1. Liquidity Improvement

The most immediate and visible impact was significantly enhanced market liquidity:

  • Average daily trading value increased substantially
  • Bid-ask spreads narrowed, particularly for mid-cap stocks
  • Greater institutional participation in previously illiquid names
  • Reduced price volatility for smaller companies

2. Valuation Re-rating

Singapore stocks experienced a systematic valuation expansion:

  • The STI’s 21% gain significantly outpaced earnings growth, indicating multiple expansion
  • Small and mid-cap stocks saw even more dramatic re-ratings
  • The “Singapore discount” that had persisted for years began to compress
  • Forward P/E multiples moved closer to regional peers

3. IPO Pipeline Development

While full impact won’t be visible until 2026-2027, early indicators are positive:

  • Increased interest from regional companies considering Singapore listings
  • Higher quality of companies in the listing pipeline
  • Greater diversity of sectors represented among prospective listings
  • Improved pricing dynamics for new issues

4. Institutional Interest

Professional investors significantly increased allocation to Singapore equities:

  • Foreign institutional ownership of SGX stocks increased
  • Asset managers launched Singapore-focused funds
  • Greater research coverage from international brokerages
  • Inclusion in more regional and global investment portfolios

5. Retail Investor Engagement

Local retail investors showed renewed interest:

  • Account opening activity increased at local brokerages
  • Greater participation in IPOs and secondary offerings
  • Improved sentiment reflected in surveys and trading patterns
  • More active use of supplementary retirement scheme (SRS) funds for equity investment

Structural Long-Term Impact

1. Market Depth and Resilience

The reforms are fundamentally changing the market’s structural characteristics:

  • More diversified investor base reduces single-point-of-failure risks
  • Enhanced liquidity means market can absorb larger transactions without excessive price impact
  • Broader coverage universe creates more investment opportunities across market cap spectrum
  • Improved price discovery mechanisms lead to more efficient capital allocation

2. Corporate Behavior Changes

Listed companies are adapting to the new environment:

  • Greater focus on shareholder value creation
  • More proactive investor relations efforts
  • Increased willingness to undertake corporate actions (spin-offs, restructurings)
  • Better capital allocation discipline
  • Enhanced transparency and disclosure practices

The various corporate restructurings in 2025 (Jardine group transactions, property company spin-offs, maritime sector carve-outs) exemplify this new dynamic approach to value creation.

3. Singapore’s Regional Positioning

The reforms enhance Singapore’s competitiveness as a regional financial center:

  • Stronger attraction for regional companies seeking listing venues
  • Enhanced reputation for corporate governance and investor protection
  • Better integration into regional and global capital flows
  • Increased relevance as asset allocation destination for international investors

4. Economic Development Benefits

A vibrant equity market creates broader economic advantages:

  • More efficient capital allocation to growth sectors
  • Enhanced ability for SMEs to access growth capital
  • Greater wealth effect supporting consumer spending
  • Stronger financial services ecosystem (banking, asset management, advisory)
  • Reinforces Singapore’s status as wealth management hub

5. Talent and Innovation Impact

A healthy equity market creates positive spillover effects:

  • Attracts financial services talent to Singapore
  • Provides exit opportunities for venture capital and private equity
  • Encourages entrepreneurship (knowing public markets offer eventual liquidity)
  • Supports innovation ecosystem through visible success stories
  • Creates demonstration effects for other potential listing candidates

Sector-Specific Impacts

Banking Sector: The strong equity market benefits Singapore banks multiple ways:

  • Higher wealth management fee income
  • Increased trading and brokerage revenues
  • Greater loan demand from margin lending
  • Enhanced corporate finance advisory opportunities
  • Stronger balance sheets from equity portfolio appreciation

Real Estate: REITs benefited significantly from the reforms:

  • Better liquidity supporting institutional ownership
  • Tighter trading spreads making them more attractive
  • Enhanced ability to raise capital for acquisitions
  • Stronger currency for mergers and consolidation
  • More attractive yields relative to bonds as rates normalize

Small-Cap Companies: Perhaps the biggest beneficiaries of the reforms:

  • Previously illiquid stocks gained meaningful trading activity
  • Valuations expanded as institutional investors could participate
  • Enhanced access to capital for growth initiatives
  • Greater analyst coverage providing visibility
  • Reduced “small-cap discount”

Social and Policy Implications

1. Retirement Security

Enhanced equity market performance benefits retirement savings:

  • Central Provident Fund (CPF) investment scheme members benefit from higher returns
  • Supplementary retirement scheme holders see portfolio appreciation
  • Greater confidence in equities for long-term wealth building
  • Reduced reliance on property as sole wealth storage vehicle

2. Income Inequality Considerations

Strong equity markets have complex distributional effects:

  • Wealth gains concentrated among those with equity exposure
  • Potential widening of wealth gaps if market access remains limited
  • Importance of financial literacy programs to broaden participation
  • Need for inclusive investment products accessible to all income levels

3. Policy Success Demonstration

The reforms demonstrate that well-designed policy interventions can create positive change:

  • Validates activist approach to market development
  • Provides template for other policy areas
  • Enhances government credibility on economic management
  • Creates momentum for further reforms in other sectors

Challenges and Considerations

Despite the positive impact, several challenges require ongoing attention:

1. Sustainability of Gains

The 2025 rally was partially driven by multiple expansion and one-time corporate actions. Sustaining momentum requires:

  • Continued earnings growth to justify valuations
  • Maintaining reform implementation momentum
  • Avoiding policy reversals that could undermine confidence
  • Demonstrating tangible improvements in market functioning

2. Global Headwinds

External factors could overwhelm domestic reforms:

  • US-China tensions affecting regional trade
  • Global recession risks
  • Major market dislocations in developed markets
  • Currency volatility impacting cross-border flows

3. Execution Risk

Reform implementation requires sustained effort:

  • Fund managers must deploy capital effectively
  • Listed companies must improve governance meaningfully
  • Regulators must maintain balanced oversight
  • Market infrastructure must continue evolving

4. Avoiding Unintended Consequences

Well-intentioned reforms can create risks:

  • Excessive speculation in small-cap stocks
  • Lower-quality companies rushing to list
  • Governance standards slipping under lighter regulation
  • Market concentration if large caps attract disproportionate flows

5. Measuring Success

Defining and tracking success metrics is complex:

  • Short-term price gains may not reflect structural improvement
  • Liquidity can be cyclical
  • Corporate governance changes take time to manifest
  • International competitiveness is relative to other evolving markets

Recommendations for Stakeholders

For Investors

Institutional Investors:

  • Maintain increased allocation to Singapore equities given improved market structure
  • Focus on quality companies with strong governance and sustainable dividends
  • Balance exposure across sectors to capture thematic opportunities (logistics, data centers, tourism)
  • Monitor execution of corporate restructurings for value creation opportunities
  • Engage actively with companies to reinforce governance improvements

Retail Investors:

  • Take advantage of improved liquidity to build diversified portfolios
  • Focus on dividend-yielding blue chips for income generation
  • Consider REITs for real estate exposure with better liquidity than physical property
  • Exercise caution with small-cap speculation despite improved trading conditions
  • Utilize SRS contributions for tax-efficient equity investment

Foreign Investors:

  • Recognize Singapore’s enhanced competitiveness as regional allocation destination
  • Appreciate governance improvements that reduce emerging market risk premiums
  • Consider Singapore as core rather than tactical allocation
  • Evaluate sector exposure through Singapore-listed regional champions

For Listed Companies

Proactive Value Creation:

  • Review portfolio for non-core assets suitable for divestment or spin-offs
  • Enhance investor relations capabilities to capitalize on improved market interest
  • Consider special dividends or buybacks if balance sheets are overcapitalized
  • Improve disclosure quality to support research coverage
  • Strengthen board composition and governance practices

Capital Raising:

  • Take advantage of improved market conditions for fundraising
  • Consider equity financing for growth initiatives while valuations are favorable
  • Explore REIT spin-offs for real estate portfolios
  • Engage proactively with the enlarged institutional investor base

For Regulators

Sustained Momentum:

  • Continue implementing and refining reform measures
  • Monitor for unintended consequences and adjust policies accordingly
  • Maintain balance between facilitation and investor protection
  • Enhance cross-border cooperation with other regulators
  • Develop metrics to track reform effectiveness

Next Phase Considerations:

  • Evaluate success of initial reforms before expanding further
  • Consider additional measures to deepen derivatives markets
  • Explore opportunities for greater regional market integration
  • Enhance retail investor education and protection
  • Foster fintech innovation in capital markets

For Companies Considering Listing

Timing and Preparation:

  • Current environment is favorable for quality listings
  • Ensure governance and financial reporting meet international standards
  • Develop compelling equity story that differentiates from peers
  • Build relationships with institutional investors pre-IPO
  • Consider Singapore versus other regional venues based on strategic fit

Conclusion

Singapore’s equity market transformation in 2025 represents a significant success story in market development policy. The comprehensive MAS reform package, combined with favorable external conditions, catalyzed a broad-based rally that enhanced liquidity, improved valuations, and reinvigorated investor interest across market segments.

The 2026 outlook remains constructive despite expectations for more moderate gains. Projected STI targets around 4,880 points (approximately 6% upside) reflect a maturing bull market focused on earnings growth and dividends rather than valuation expansion. This represents a healthy evolution toward sustainable performance.

Key themes for 2026 include logistics infrastructure, data centers, tourism recovery, and selective opportunities in construction, offshore energy, and special dividend candidates. These sectors align with Singapore’s broader economic strategy and should benefit from continued capital deployment by institutional investors.

The impact of 2025’s reforms extends far beyond immediate price appreciation. Structural improvements in market liquidity, corporate governance, regulatory framework, and international competitiveness create a foundation for sustained market development. These changes position Singapore more favorably in regional competition for listings and investment capital.

However, challenges remain. External risks including global economic slowdown, trade tensions, and market volatility could offset domestic improvements. Execution of reforms requires sustained commitment from all stakeholders. Most critically, the sustainability of gains depends on earnings growth justifying current valuations.

For investors, the transformed Singapore market offers compelling opportunities, particularly for those seeking quality, governance, and dividend income in an uncertain global environment. The combination of attractive yields (approximately 4.9%), reasonable valuations (13.9x forward P/E), and structural improvements makes Singapore equities worthy of serious consideration in diversified portfolios.

The 2025-2026 period may be remembered as a turning point when Singapore successfully modernized its equity market to compete more effectively in the regional and global arena. Whether this moment leads to sustained outperformance or represents a cyclical peak will depend on continued policy support, corporate execution, and the trajectory of global economic conditions.

The foundation has been laid. The challenge now is building upon it.