- STI constituents excluding banks are expected to deliver double-digit EPS growth in 2026, increasing ever higher when both financials and REITs are removed.
- Key industrial names such as Keppel and ST Engineering illustrate how resilient GDP growth, rising PMI, and sector trends are supporting earnings visibility.
- Singapore’s telecommunications sector is entering a healthier phase, with Singtel well positioned for earnings improvement in 2026.
- Singapore’s consumer and tourism sector is showing a positive outlook, supported by a recovery in visitor arrivals and higher-value tourism, with Genting Singapore expected to benefit.
- Banks and REITs continue to support the STI’s role as a reliable anchor for income and stability, while other STI constituents are contributing to overall earnings expansion, reinforcing our positive outlook for the Singapore equity market in 2026.
Singapore remains one of our top market recommendations for 2026. We believe increasingly compelling opportunities are emerging beyond the traditional heavyweights, signalling broader market attractiveness across the Singapore equity landscape.
When it comes to the Straits Times Index (STI), earnings discussions have historically centred on the three local banks, which together account for roughly half of the index’s total weight. Although the banks remain resilient and well capitalised, earnings growth expectations for 2026 are relatively modest. Our forecasts point to low single-digit EPS growth for DBS and OCBC, with UOB being the exception, as it is expected to recover from a nearly 20% EPS contraction in the prior year.
Related Article: We remain constructive on SG banks following 3Q earnings, but DBS remains our favourite pick
This naturally raises a key question for investors: if bank earnings growth is steady but muted, what is really driving the STI’s earnings expansion in 2026?
The answer lies in the other half of the index.
Based on the market-cap-weighted average of consensus EPS forecasts, STI constituents excluding banks are expected to deliver double-digit EPS growth of 11.2% in 2026, increasing to 13.1% when both financials and REITs are removed. This compares favourably with the STI’s overall blended earnings growth and highlights where earnings momentum is relied on.
Figure 1: Non-bank and non-REIT constituents lead STI earnings growth in 2026
In other words, a broader group of constituents, spanning industrials, telecommunications, and consumer-related sectors, is becoming the primary driver of earnings growth. This shift underscores a more diversified and fundamentally strong STI, reinforcing the index’s attractiveness and upside potential heading into 2026.
Industrials: Resilient growth anchored by structural demand
Singapore’s industrial and manufacturing sector enters 2026 with durable resilience, supported by official GDP growth projections of 1.0–3.0% from the Ministry of Trade and Industry (MTI). Encouragingly, business sentiment within the manufacturing sector has turned positive. Surveys conducted by the Economic Development Board (EDB) for October 2025–March 2026 indicate improving conditions, particularly in semiconductors, aerospace maintenance, and pharmaceuticals & medical technology—segments that form the core of Singapore’s manufacturing base.
Signs of steady expansion are also visible in activity data. Singapore’s Manufacturing PMI rose slightly to 50.3 in December 2025, the fifth month in a row above the 50-point mark. The increase was supported by stronger new orders and higher factory output, indicating modest but sustained growth.
Figure 2: Singapore’s latest Manufacturing PMI marks the highest reading since March 2025
Within the STI, key industrial constituents such as Keppel and ST Engineering provide clear examples of how these positive macro and sector trends are translating into earnings visibility for 2026.
Keppel: Expanding recurring income and balance sheet optionality
Keppel’s transformation into a more asset-light, recurring-income-driven group continues to gain traction. Over the first nine months of 2025, the group delivered strong earnings momentum, with net profit rising 25% year-on-year, supported by expansion across all core segments. Importantly, recurring income grew by close to 15% year-on-year, driven by higher contributions from asset management and operating income.
Beyond organic growth, Keppel’s asset monetisation strategy provides meaningful upside optionality. Management has already monetised approximately SGD 2.4 billion of non-core assets, including real estate and telecommunications assets, and is on track to surpass its interim target of SGD 10 – 12 billion by the end of 2026. Successful execution could translate into higher realised gains, stronger shareholder returns, or redeployment of capital into higher-growth opportunities, supporting both EPS growth and balance sheet flexibility.
The infrastructure segment further underpins earnings stability. As at end-September 2025, around two-thirds of contracted power generation capacity is secured for three years or more, providing solid revenue visibility. The 600MW Keppel Sakra Cogen Plant, expected to commence operations in 1H 2026 and already substantially contracted, should further lift recurring income.
ST Engineering: Strong order book supporting earnings visibility
In late December 2025, ST Engineering announced that, after accounting for all one-off effects, the group expects to report a positive net profit for the second half of 2025. This guidance signals management’s confidence in the resilience of its underlying operations.
Fundamentally, ST Engineering continues to build a very large and expanding order backlog. In the first nine months of 2025, the group secured SGD 14.0 billion in new contracts, including SGD 4.9 billion in 3Q 2025 alone. This lifted the order book to a new high of SGD 32.6 billion as at end-September 2025, with approximately SGD 30 billion of contracts scheduled for delivery beyond 2025. Such scale provides clear multi-year revenue visibility into 2026, underpinning earnings stability and supporting margin recovery.
Operational momentum remains broad-based across all business segments. The Commercial Aerospace division continues to benefit from strong demand for engine MRO and nacelles, reflecting the sustained recovery in global air travel. Defence & Public Security has delivered steady growth across sub-segments, supported by resilient defence and security spending. Meanwhile, Urban Solutions & Satcom continues to expand on the back of smart-city initiatives and infrastructure-related projects, reinforcing the group’s diversified earnings base.
Telecommunications: From price wars to earnings diversification
Singapore’s telecommunications sector is entering a healthier and more rational phase. The proposed acquisition of M1 by SIMBA, expected to be completed by early 2026, would reduce the number of mobile network operators from four to three. This long-awaited “right-sizing” of the market is likely to temper intense price competition and support the stabilisation of mobile Average Revenue Per User (ARPU).
The impact of earlier price compression is evident in mobile ARPU, which fell about 30% from 2018 to 2023 and has continued to trend downward into 2024 and 1H25. While this prolonged pressure weighed on sector profitability, it also means the industry is now starting from a low earnings base. Although growth in traditional mobile and broadband services may appear to be stagnating, major players such as Singtel and StarHub have increasingly shifted focus toward higher-value business lines, including ICT services, data centres, enterprise solutions, and digital platforms, to expand earnings opportunities.
Singtel: Earnings momentum returning
Singtel delivered a 14% increase in underlying net profit to SGD 1.35 billion in the half year ended 30 September 2025, driven mainly by stronger contributions from regional associates Bharti Airtel and AIS, as well as operating companies NCS and Optus. At the group level, management has turned more constructive on earnings visibility. Singtel has revised its earlier guidance of high single-digit growth and now expects Operating Company EBIT for the financial year ending 31 March 2026 to grow in the high single-digit to low double-digit range, reflecting improving operational performance across its businesses.
Beyond the core mobile segment, Singtel’s digital infrastructure platform, Nxera, has secured a SGD643 million green loan to fund DC Tuas, an approximately 58MW AI-ready data centre expected to commence operations in 2026. This positions Singtel to benefit directly from rising demand for AI workloads, cloud services, and hyperscale data centre capacity.
Consumer & tourism: Higher-value demand driving earnings recovery
Singapore’s consumer and tourism sector is entering 2026 with an optimistic outlook, underpinned by a steady recovery in visitor arrivals and a continued shift toward higher-value tourism. International arrivals are forecast to reach 17.5 to 20 million, approaching pre-pandemic levels. Even if headline arrival numbers could fall marginally short of 2019 peaks, tourism receipts have already surpassed pre-pandemic levels. The STB expects spending to reach between SGD 29 billion and SGD 30.5 billion in 2025. By 2040, it is aiming for as much as SGD 50 billion in tourism receipts.
The data aligns with Singapore’s evolving tourism strategy, which prioritises quality over quantity. Rather than maximising visitor numbers, the focus is on attracting tourists who stay longer, spend more, and engage more deeply with the city. A key pillar of this strategy is the expansion of Singapore’s Meetings, Incentives, Conventions and Exhibitions (MICE) pipeline. Notable wins include a three-year commitment from the Milken Institute Asia Summit, which will be anchored in Singapore from 2026. Together with major global events such as the Formula 1 Singapore Grand Prix and a full calendar of international conferences, exhibitions, and concerts, these events are expected to support both leisure and business travel, providing a steady and diversified demand base throughout the year.
Against this backdrop, Genting Singapore is well positioned for earnings improvement. The company is actively transforming Resorts World Sentosa (RWS) to cater to premium and experiential travellers through lifestyle events, collaborations with global intellectual properties, upgraded luxury accommodations, and new destination attractions. Higher visitor traffic at RWS is expected to lift performance across multiple business segments. Importantly, earnings growth is increasingly driven by non-gaming activities. New hotel offerings such as The Laurus at RWS, alongside the expanded Singapore Oceanarium and the continued rollout of experiential attractions, are expected to increase both visitation and spending per guest. This strengthens earnings diversification and enhances the resilience and sustainability of Genting Singapore’s recovery into 2026.
Reaffirming a positive outlook for the STI
Taken together, the STI’s outlook for 2026 reflects a more balanced combination of resilience and growth. The heavy weighted banking sector continues to provide a defensive backbone for the index, supported by resilient financial fundamentals and earnings stability, with non-interest income playing an increasingly important role.
At the same time, improving funding conditions and stabilising property markets are creating a more supportive environment for REITs. In a lower interest rate setting, their attractive dividend yields continue to appeal to income-oriented investors. Together, banks and REITs reinforce the STI’s role as a reliable anchor for income and stability.
Related article: S-REITs Outlook 2026: A more constructive year ahead with selective opportunities
Other STI constituents are increasingly contributing to overall earnings expansion, adding a growth dimension to the index. This combination of defensive income stability and improving growth momentum positions the STI more favourably as it enters 2026, highlighting its continued appeal in the year ahead.
As such, we reaffirm our positive view on the Singapore equity market for 2026. Backed by policy initiatives, structural sector tailwinds, and a healthier earnings mix, the STI offers 9.4% upside from its 19 January 2026 share price, alongside a dividend yield around 5%. We recommend that investors consider capturing this opportunity through the Amova Singapore Dividend Equity SGD Fund and the Amova Singapore STI ETF (SGX: G3B). For investors seeking broader exposure beyond the STI, the LionGlobal Singapore Trust Acc SGD offers a compelling alternative.
Table 1: The STI index’s valuation table
|
STI |
2024 |
2025E |
2026E |
2027E |
|
PE Ratio (X) |
11.6 |
15.7 |
14.7 |
13.7 |
|
Earnings growth (YoY%) |
7.3% |
-6.2% |
6.8% |
7.2% |
|
Projected EPS |
327.6 |
307.4 |
328.2 |
351.7 |
|
Target Price (Based on 15X fair P/E Ratio) |
5,275 |
|||
|
Upside Potential (%) |
9.1% |
|||
|
Dividend Yield |
4.8% |
4.5% |
4.6% |
4.8% |
|
Source:
Bloomberg Finance L.P., iFAST Estimates |
||||
Figure 3: STI Price vs EPS
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