Key Points
- Policy reforms and market revitalisation initiatives may narrow Singapore’s valuation gap with other developed markets, supporting potential re-rating upside.
- Banks remain the core anchor for dividends, with DBS, OCBC and UOB delivering steady profitability and consistent mid-single-digit earnings growth.
- Industrials are emerging as the next earnings driver, with companies such as ST Engineering and Yangzijiang Shipbuilding contributing stronger earnings growth beyond the banks.
- Singapore is emerging as a safe-haven wealth hub amidst Middle East turmoil, benefiting banks and investors through political stability, regulatory clarity, incoming safe-haven capital inflows and a structurally strong SGD.
- Applying our fair value P/E of 15X to projected 2028E EPS, we derive an end-2028 target of 5,987 for the STI, which implies 20.5% price upside from 19 March 2026.
Global markets have recently faced renewed volatility as escalating tensions between the US and Iran have raised geopolitical risks and pushed energy prices higher. The resulting uncertainty has complicated the global macro outlook, with concerns that higher energy costs could keep inflation elevated and delay the pace of monetary easing.
Against this backdrop, Singapore equities have demonstrated notable resilience. Compared with several regional markets that experienced sharper declines during the recent selloff, the Singapore market has remained relatively stable. This performance reinforces the defensive characteristics that have historically defined Singapore equities.
Figure 1: Singapore’s resilience shone after major developed markets opened after the US-Iran conflict escalated
In addition to its defensive qualities, Singapore’s equity market is entering a phase of structural transformation. Policymakers are implementing initiatives to strengthen capital market competitiveness and enhance liquidity, in what could be viewed as a “Singapore Value Unlock” programme, similar to reforms in markets such as Japan and South Korea.
These developments could help broaden investor participation and unlock value across the market over time.
Related article: Middle East war rocks Asian markets, but don’t let fear drive your trades
Related article: Singapore Budget 2026 accelerates market revitalisation and structural growth
Related article: Singapore 2026 market outlook: Policy tailwinds set the stage for equity gains
Market revitalisation efforts to drive further growth
The Monetary Authority of Singapore’s Equity Market Development Programme (EQDP) aims to enhance market liquidity, strengthen the research ecosystem and attract greater institutional participation in Singapore-listed equities.
These efforts were further reinforced in the Singapore Budget 2026, which announced additional funding of SGD 1.5 billion for the Financial Sector Development Fund to expand EQDP.
Table 1: Singapore’s market revitalisation efforts
|
Initiative |
Aim |
Size |
Latest Development |
|
Equity Market Development Programme (EQDP) |
Strengthen Singapore’s asset management and research ecosystem to boost investor interest in local equities. |
SGD 6.5 billion* |
MAS appoints a total of nine EQDP asset managers, with SGD 3.95 billion in placements. |
|
Value Unlock Package |
Deepen investor engagement and sharpen companies’ focus on shareholder value creation. |
SGD 30 million |
MAS launches two grants to build competencies in corporate strategy, capital optimisation, and investor relations. |
|
Enhanced Grant for Equity Market Singapore (GEMS) Scheme |
Enhance the equity research ecosystem to support growth in Singapore’s listed product suite. |
SGD 50 million |
Increased research activity, with more non STI stocks receiving coverage; reports are available on the SGX website. |
|
Launch of iEdge Singapore Next 50 Index |
To provide a "next in line" benchmark after the 30 largest blue-chip stocks in the STI. |
N.A. |
Track the top 50 large and mid-cap companies listed on the SGX Mainboard that are not included in the STI; potential for future products seeking to track the index, boosting passive ETF inflows and in turn, liquidity |
|
SGX-Nasdaq dual-listing bridge |
Attract quality Asia-based growth companies (≥ SGD 2 billion market cap) with global ambitions to raise capital in Singapore. |
N.A. |
Relevant regulatory processes are underway for the new Board, which is expected to launch around mid-2026. |
|
Source: Monetary Authority of
Singapore |
|||
Such structural reforms are particularly meaningful for small- and mid-cap companies, which have historically traded at valuation discounts due to limited liquidity and relatively lower analyst coverage. As market participation broadens and trading liquidity improves, these companies could attract greater investor attention and potentially experience valuation re-rating.
That said, experience from similar market revitalisation initiatives suggests that large-cap stocks typically benefit first, before positive effects gradually cascade to small- and mid-cap names. As these programmes help narrow valuation gaps between Singapore and other developed markets, the initial re-rating tends to be reflected in large caps, where institutional capital is more readily deployed and benchmark alignment is stronger.
Singapore Exchange’s February 2026 data underscores a broad-based market revival. Securities daily average value (SDAV) hit SGD 2.1 billion, the highest since 2020 and up 45% YoY, while total turnover rose 30% to SGD 38.5 billion. Retail participation reached a 13-year high, and ETF monthly turnover more than doubled YoY to SGD 1.1 billion, supported by record SRS inflows exceeding SGD 1 billion for the first time.
The STI crossed 5,000, reaching a record 5,041 on 23 February, with gains led by real estate and industrials. Small- and mid-cap SDAV surged 135% YoY on sustained institutional demand, showing the rally extends beyond blue chips.
Industrials emerge as the main earnings driver this year
Singapore’s market structure reinforces its defensive characteristics. The Straits Times Index (STI) is heavily concentrated in Financials, which account for about 46.1% of the index, followed by Industrials (18.0%) and Communication Services (11.4%) as of 12 March 2026. This composition combines stable financial earnings with companies exposed to structural growth trends, supporting the case for steady, resilient earnings across the market.
Figure 2: Banks are still the heavyweights in the STI
However, when we compared the earnings across different sectors in the STI, industrials shone for 2026. For instance, ST Engineering and Yangzijiang Shipbuilding. ST Engineering is benefiting from rising global defence budgets, with record contract wins and a growing backlog supporting 2026 earnings visibility. Yangzijiang Shipbuilding’s order book reached a record USD 22.4 billion (245 vessels) (As of 31 Dec 2025) for deliveries through 2030. Early 2026 order momentum remains strong as the company prioritises filling 2029 slots and gradually opening 2030 positions.
Overall, earnings growth across the industrials sector is likely to propel the STI this year, while financials would anchor the STI with dividend yield.
Related article: Non-bank, non-REIT constituents lead STI earnings growth in 2026
Table 2: Forecasted Consensus EPS Growth of some industrial names that are poised for stronger growth (%)
|
Name (Ranked based on Market Capitalisation) |
Forecasted Consensus Earnings Per Share Growth (%) |
||
|
2026E |
2027E |
2028E |
|
|
Singapore Tech Engineering |
121.5% |
15.2% |
13.2% |
|
Keppel Ltd |
29.1% |
11.1% |
6.8% |
|
Yangzijiang Shipbuilding |
12.5% |
17.1% |
3.2% |
|
Seatrium Ltd |
40.0% |
21.9% |
2.5% |
|
SATS Ltd |
15.0% |
15.3% |
- |
|
Source: Bloomberg Finance
L.P., iFAST Compilations |
|||
Singapore: The quiet winner in the Middle East chaos
While the Middle East burns, Singapore has quietly emerged as a potential beneficiary.
Gulf states like Dubai, Abu Dhabi, and Bahrain spent the past decade building themselves into world-class wealth management centres. They invested heavily in financial infrastructure, slashed taxes, courted family offices and private banks, and successfully positioned themselves as the crossroads between East and West for global capital.
That stability premium has now been destroyed. The cities that once represented calm and prosperity in an otherwise turbulent region are now active conflict zones — and wealth, above all else, moves away from uncertainty.
In contrast, Singapore is consolidating its role as a global safe haven and diversification hub. Its appeal lies in political stability, regulatory clarity, and its ability to attract capital from Southeast Asia, the Middle East, and investors seeking a reliable alternative to traditional Western wealth centres. This was true before the Middle East crisis. The crisis has now accelerated this existing trend dramatically.
Singapore's three major banks — DBS, OCBC, and UOB — are well positioned to capture this dynamic. They have minimal direct energy exposure and benefit from higher net interest margins in the current rate environment. Now, a third tailwind is emerging: fee income from wealth management inflows as Gulf capital seeks a new home.
The SGD adds a further dimension to the appeal. Unlike the Gulf's dollar-pegged currencies, the SGD is a free-floating currency managed by the MAS with a structural bias toward gradual appreciation. For a wealthy family moving wealth out of a conflict zone, parking assets in a currency that the central bank actively manages toward strength is highly attractive.
The upcoming MAS policy decision may tighten the SGD's appreciation band further in response to energy inflation, making the currency more attractive at precisely the moment that Gulf wealth is seeking a new home. For Singapore's banks and the investors who hold them, this is one of the few unambiguous tailwinds in an otherwise difficult environment.
Add Singapore exposure to your portfolio today
We maintain our 4.0-star "Very Attractive" rating on the Singapore market. Singapore equities remain attractively positioned from a valuation standpoint, supported by a broadening set of structural catalysts.
The STI has undergone a meaningful re-rating over the past two years. The forward P/E has climbed from trough levels near 11–12X in early 2023 to 15X as of 19 March 2026, now in line with our maintained fair value target.
Figure 3: STI 10-year Forward P/E
Critically, this re-rating is not a function of speculative multiple expansion. It is anchored by improving earnings fundamentals: robust earnings of the banks and the recovering industrial earnings.
Key structural catalysts continue to support the market. The Equity Development Programme (EQDP), GEMS, and the Value Unlock programme are drawing both institutional and retail participation back to Singapore equities, improving liquidity, encouraging corporate engagement, and helping to close the longstanding valuation discount relative to regional and global peers.
STI to reach close to 6,000 by 2028, accompanied by an annual dividend yield of 5%
We maintain our fair value STI forward P/E multiple at 15X. At the current market level of 4,968 (as of 19 March 2026), the STI is already trading at 15X. This means that the P/E multiple is fully priced in. From here, further price upside is driven entirely by earnings growth rather than any additional re-rating premium.
Applying our maintained 15X fair value P/E to projected 2028E EPS, we derive an end-2028 target of 5,968 for the Straits Times Index. This implies 20.5% price upside from 19 March 2026, with an additional annual dividend yield of 4.8% over three years. This positions Singapore equities as an attractive risk-adjusted opportunity amidst heightened global macro backdrop uncertainty.
Figure 4: STI’s Index vs EPS
Table 3: STI’s earnings table
|
STI |
2025 |
2026E |
2027E |
2028E |
|
PE Ratio (X) |
15.2 |
14.6 |
13.6 |
12.4 |
|
Earnings growth (YoY%) |
6.2% |
11.9% |
7.3% |
9.0% |
|
Projected Earnings Per Share (EPS) |
305.0 |
341.3 |
366.2 |
399.1 |
|
Forward Dividend Yield (%) |
4.67% |
4.65% |
4.84% |
4.92% |
|
Target Price (Based on 15X fair P/E Ratio) |
5,987 |
|||
|
Upside Potential (%) |
20.5% |
|||
|
Source: Bloomberg Finance L.P., iFAST Estimates Data as of 19 March 2026. |
||||
For investors seeking exposure to Singapore’s equity market, we continue to recommend positioning through the Amova Singapore Dividend Equity SGD Fund, the Amova Singapore STI ETF (SGX: G3B), and the LionGlobal Singapore Trust Fund for broader exposure.
|
Exposure |
Recommended Product |
|
Singapore |
|
|
EQDP (higher SMID exposure) |
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