Singapore: Yield, growth and revitalisation in one market

• Singapore's equity market rating remains at 4.0 Stars "Very Attractive". The STI offers an attractive combination of dividend yield and earnings growth, underpinned by resilient bank profitability and strong industrial sector momentum.
• Banks anchor STI income. DBS, OCBC, and UOB delivered above-consensus 1Q26 results, with non-interest income taking the lead as Singapore's strengthening safe-haven status continues to drive wealth management inflows.
• Industrials remain the primary earnings growth driver. ST Engineering and Yangzijiang Shipbuilding are delivering multi-year earnings visibility through record order books, rising defence budgets, and sustained global shipping demand. Industrials now represent the second-largest STI sector weighting, having overtaken S-REITs.
• Capital market revitalisation is broadening market participation. In May 2026, SGX's securities daily average value hit SGD 2.4 billion (the highest since October 2007) (79% year-on-year (YoY), while small- and mid-cap Securities Daily Average Value (SDAV) rose more than four times YoY. SGX is on track for close to 30 listings in 2026. SMID-cap indices have demonstrated higher EPS growth than the STI, offering compelling return potential.
• We maintain our STI target of 5,987 by end-2028. This translates to approximately 15% price upside from 23 June 2026, alongside an annual dividend yield of approximately 4.5%.

As we enter 2H26, Singapore equities continue to occupy a distinctive position against an uncertain global macro backdrop. While global markets have grappled with sustained geopolitical volatility (from the ongoing Middle East conflict to shifting trade policy), Singapore has demonstrated resilience. The Straits Times Index (STI) has delivered approximately 14.2% total return year-to-date (YTD) as of 23 June 2026, outperforming several regional peers during this period of elevated uncertainty.

Figure 1: Performance of STI vs other major markets

The investment thesis for Singapore has evolved from a purely defensive narrative. In 1Q26, we highlighted that structural catalysts like AI-driven export growth, safe-haven wealth inflows, and capital market revitalisation were beginning to complement the market's traditional income characteristics. The evidence has since strengthened. May’s Non-Oil Domestic Exports (NODX) expanded at its fastest pace since December 2003, bank earnings results beat consensus, and manufacturing Purchasing Managers’ Index (PMI) extended its expansion streak to ten consecutive months. Singapore is not merely weathering external headwinds; it is capitalising on them.

With this context in mind, we maintain our 4.0-Star "Very Attractive" rating on Singapore equities and our STI target of 5,987 by end-2028, implying approximately 15% price upside as of 23 June’s closing alongside an annual dividend yield of approximately 4.5%. The outlook is organised around three key pillars: income resilience anchored by the banking sector; earnings growth leadership in industrials and the technology supply chain; and the broadening opportunity created by ongoing capital market revitalisation efforts.

Related article: Singapore: STI to hit near 6,000 by the end of 2028, alongside an annual dividend yield of 5%

Singapore banks: Income anchor with improving earnings quality

Singapore's three major banks are entering 2H26 in their strongest earnings position in several years. All three delivered consensus-beating 1Q26 results, with DBS and OCBC reporting record total income. The defining shift is the growing durability and diversification of the earnings base. Non-interest income, particularly wealth management fees and trading revenue, is the primary growth engine across the sector, absorbing the pressure that lower rates continue to exert on net interest margins (NIM).

NIM compression is approaching a cyclical floor. DBS held broadly flat at 1.89% in 1Q26, UOB compressed by just 2 basis points quarter-on-quarter (QoQ) to 1.82%, and OCBC declined 10 basis points QoQ to 1.76%. Critically, the Federal Reserve's rate path has shifted. With persistent energy-driven inflation and geopolitical disruption reinforcing a higher-for-longer environment, SORA, which fell sharply through 2025 to around 1.1%, now appears close to its trough. If rates remain elevated, NIMs are likely to stabilise earlier than previously anticipated.

Figure 2: SORA remains relatively low in 2026

The structural tailwind underpinning non-interest income growth is Singapore's emergence as a global wealth hub. Safe-haven capital inflows accelerated by the Middle East conflict and Dubai's diminished appeal as a stable wealth centre have driven tangible volume growth across the private banking franchises of all three banks. OCBC reported rising net wealth inflows from the Gulf region, while DBS recorded a record of SGD 907 million in wealth management fees in 1Q26. MAS is reinforcing this momentum by targeting private banking account opening times of within one month by end-2026, reducing onboarding friction without compromising Anti-Money Laundering (AML) standards. DBS plans to open 18 new and upgrade 36 existing wealth centres across APAC by end-2027, signalling a structural commitment to capturing this opportunity.

For investors, the income case for Singapore banks is clear. DBS's annualised dividend of SGD 3.24 per share implies a forward yield approaching 6% at current levels, the highest in the sector. Asset quality remains well-contained, with NPL ratios stable and credit costs at or below guidance across all three banks. The sector continues to offer a compelling combination of earnings resilience, strong capital generation, and attractive income returns. DBS (SGX: D05) remains our top pick among the three.

Related article: SG banks at fresh highs: The wealth hub thesis has further to run

Related article: SG banks 1Q26: Non-interest income drives earnings resilience, supporting constructive outlook

Industrials and technology: The earnings growth engine

Industrials have overtaken S-REITs to become the STI's second-largest sector weighting, and the sector is living up to its elevated prominence. ST Engineering (SGX: S63) and Yangzijiang Shipbuilding (SGX: BS6) are the standout contributors to index earnings growth in 2026. ST Engineering's record contract wins and growing backlog translate into multi-year earnings certainty, reflecting genuine operational momentum in its defence and smart city segments. Yangzijiang Shipbuilding's order book reached USD 22.3 billion as of 1Q26, with 252 vessels contracted for delivery through 2030. The group continues to prioritise filling 2029 and 2030 slots, providing sustained earnings visibility at the back end of our forecast horizon.

Beyond these STI heavyweights, Singapore's integration into the global AI semiconductor supply chain has created another layer of earnings growth. May 2026 NODX surged 38.4% year-on-year (YoY) (the fastest expansion since December 2003) driven by a near-doubling in electronic exports. Integrated circuits, disk media products, and PCs were the primary drivers, all direct beneficiaries of accelerating hyperscaler AI infrastructure spending. The five largest US hyperscalers have collectively committed between USD 660 billion and USD 690 billion in 2026 capital expenditure, with approximately 75% directed at AI (nearly double 2025 levels).

Singapore's role in this supply chain is deepening. Applied Materials opened its USD 500 million Tampines Campus in June 2026, more than doubling its advanced cleanroom capacity in Singapore. Micron's high-bandwidth memory advanced packaging facility commenced ramp in 2026, backed by a decade-long USD 24 billion commitment. Nvidia confirmed its first Singapore research hub, focused on embodied AI. These are operating assets anchoring demand well into 2027 and beyond.

Among SGX-listed beneficiaries, UMS Integration (SGX: 558) remains our preferred pick, offering strong 1Q26 results (+43% YoY net profit), improving customer diversification, and a 4.4% dividend yield — at valuations that remain reasonable relative to AEM Holdings following the latter's about 500% YTD share price rally.

Singapore's manufacturing PMI extended its expansion streak to ten consecutive months in May 2026, with the headline rising to a five-month high of 51.0. Electronics PMI hit 51.9, its twelfth consecutive month of expansion. Forward indicators reinforce the sustainability of this recovery: the future business expectations index remained in expansion territory for a seventh consecutive month, while order backlogs increased for a fifth straight month. The structural growth backdrop for Singapore's industrial and technology sectors is among the most durable in the region.

Related article: Singapore defies regional weakness as economic resilience drives STI to record highs

Related article: Singapore’s semiconductor stocks: Riding the AI-driven upcycle

Related article: Still expanding: What Singapore's ten-month PMI streak says about the road ahead

Capital market revitalisation: SMID-cap re-rating underway

As of early June 2026, SGD 2.6 billion of Equity Market Development Programme (EQDP) capital remains available for deployment in 2H26, with nine asset managers appointed by MAS and SGD 3.95 billion in placements executed to date. According to MAS, the third batch of asset managers will be announced by end-June.

Improving liquidity and shareholders’ returns: The impact is unmistakably visible in market microstructure: SGX's Securities Daily Average Value (SDAV) climbed 79% YoY in May 2026 to SGD 2.4 billion (the highest since October 2007) while total securities market turnover rose 70% YoY to SGD 45.8 billion for the month. Small- and mid-cap (SMID) momentum was even more pronounced, with SMID SDAV rising more than four times YoY; institutional investors remained net buyers of small- and mid-caps for a fifth consecutive month, bringing cumulative net inflows over the past twelve months to over SGD 800 million. The SGX Value Unlock Programme is also beginning to drive tangible corporate responses, with primary-listed companies repurchasing shares totalling SGD 911 million in the first four months of 2026 — significantly above prior years' levels.

Growing IPO pipeline, further supported by the upcoming SGX-Nasdaq dual listing bridge: The IPO and listings pipeline further reinforces this momentum. SGX is on track for close to 30 listings in 2026, following a record year for IPO proceeds in 2025 of SGD 3 billion, reflecting improving market sentiment and the growing attractiveness of Singapore as a listing destination. The SGX-Nasdaq dual-listing bridge, expected to go live around mid-2026, represents the next structural catalyst.

By enabling Asia-based growth companies with market capitalisations of at least SGD 2 billion to raise capital simultaneously in Singapore and on Nasdaq, the bridge may broaden the STI's traditional financial and real estate concentration. Over time, this diversification should enhance the market's appeal to growth-oriented investors and increase index exposure to new-economy themes, gradually shifting SGX's profile beyond its historically REIT-heavy composition. This may also drive re-rating potential for STI as “new economy” companies generally command much higher PE multiples than financial and real estate counterparts.

Greater tech exposure within SMID relative to STI: The SMID-cap opportunity is particularly compelling. Many of Singapore's most dynamic growth companies, spanning semiconductor supply chains, data centres, and construction technology, are concentrated in this segment of the market. As EQDP capital flows deepen research coverage and trading liquidity, valuation re-rating across SMID caps is underway.

CPF Lifecycle Investment Scheme: The upcoming Central Provident Fund (CPF) Lifecycle Investment Scheme could also underpin the long-term depth of Singapore’s capital market. This was announced at Budget 2026 and is set for launch in 2028 and could direct up to SGD 9 billion annually into Singapore equities. By allowing CPF members to allocate retirement savings into diversified life-cycle portfolios that include equities, the scheme represents a structurally significant source of domestic liquidity that, over time, should deepen market participation and support valuations across the index.

Related article: EQDP: The spark that Singapore's equity market needed — and why the momentum is here to stay

A stronger SGD to combat imported inflation

The macro backdrop further supports this constructive view. MAS's decision to steepen the S$NEER appreciation path reinforces the SGD's role as a wealth preservation currency, supporting continued capital inflows into SGD-denominated assets. Singapore's core CPI eased to 1.4% YoY in April 2026, and the managed appreciation framework provides a calibrated buffer against imported inflation. These factors collectively create a stable operating environment that is conducive to equity market expansion and corporate investment.

Related article: Singapore inflation and monetary policy: Stronger SGD to absorb imported oil price shock

Singapore remains 4.0 stars – Very Attractive, for its yield and growth

The investment case for Singapore rests on a combination of attractive dividend yields and earnings growth that is rare among developed equity markets.

• Banks provide the income anchor: sector-wide dividend yields approaching 5–6%, well-covered by resilient earnings and strong capital generation, with an improving non-interest income trajectory that is increasingly structural rather than cyclical.
• Industrials and the AI technology supply chain provide the growth engine: record backlogs, deepening semiconductor investment, and AI-driven export demand that is showing no sign of peaking.
• Capital market revitalisation is beginning to unlock the third dimension: a broadening of market depth, improved research coverage, and the conditions for a sustained SMID-cap re-rating.

Applying our fair value P/E multiple of 15X to projected 2028E earnings per share of 399.1, we maintain our STI target of 5,987 by end-2028. This implies approximately 15.0% price upside from 23 June 2026, alongside an annual dividend yield of approximately 4.5%. The STI is currently trading at 15.3X FY2026E earnings, with EPS growth expected at 11.9% in 2026E and 9.0% in 2028E. Further upside from this level is driven by earnings growth rather than multiple expansion, grounding the return thesis in fundamentals.

That said, re-rating optionality exists. SGX is on track for close to 30 listings in 2026 following a record SGD 3 billion in IPO proceeds in 2025, and the SGX-Nasdaq dual-listing bridge, expected to go live around mid-2026, could accelerate this further. By enabling Asia-based growth companies with market capitalisations of at least SGD 2 billion to list simultaneously in Singapore and on Nasdaq, the bridge may gradually diversify the STI beyond its historically financials- and real estate-heavy composition. “New-economy” companies typically command materially higher PE multiples than financial and real estate counterparts; a sustained shift in index composition toward these names could therefore drive multiple expansion beyond our current base case, representing a credible source of additional upside for long-term investors.

In our view, Singapore maintains a stable price environment, a strengthening safe-haven currency, and a policy framework designed to attract and retain global capital. For investors seeking both income and capital appreciation in a single developed-market allocation, Singapore equities remain one of the most compelling opportunities in the region.

Table 1: STI Earnings Table

Straits Times Index	FY2025A	FY2026E	FY2027E	FY2028E
PE Ratio (X)	15.2	15.3	14.2	13.0
Earnings Growth (YoY%)	6.2%	11.9%	7.3%	9.0%
Earnings Per Share (EPS)	305.0	341.3	366.2	399.1
Dividend Yield (%)	4.7%	4.3%	4.5%	4.6%
Target Price (15X fair P/E)				5,987
Upside Potential (%)				15.0%
Source: Bloomberg Finance L.P., iFAST Estimates. Data as of 23 June 2026.

Figure 3: The Straits Times Index (STI) vs Earnings Per Share (EPS) chart

Our product recommendations

We recommend positioning through the Amova Singapore STI ETF (SGX: G3B) for broad, low-cost exposure to the STI. On the other hand, for investors seeking higher SMID-cap exposure beyond the STI 30 blue chips, we recommend the iFAST-Amova Singapore Equity A SGD.

Related article: Q&A Series: iFAST-Amova Singapore Equity fund leads with a 61.31%* return over the past year

Table 2: Recommended Products for the Singapore equity market

Exposure	Recommended Product
Singapore (Index)	Amova Singapore STI ETF (SGX: G3B)
Singapore (Active UT with SMID Exposure)	iFAST-Amova Singapore Equity A SGD

Declaration:

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report — including all investment theses, ratings, price targets and conclusions — has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.