“Earlier in the year, I think a couple months ago, you saw some reports come out saying that [the] STI should reach 10,000 in a few years' time. So if you compound that, it’s really only 5% per year. And for someone to achieve 5% a year, I think that is quite achievable,” she adds.
In her equities outlook report dated Jan 5, Lee noted that the index already hit several consecutive record highs in 2025 and closed the year 22.7% up to 4,646.21 points, close to the all-time high of 4,665.12 points. December’s close also marked the index’s eight month of gains, a phenomenon not seen since 2006 to 2007.
According to Lee, Singapore’s stock market was one of the best-performing markets in the world and was up by 22%. This was in comparison to global equities which only went up by 20%. In fact, the returns investors can get on Singapore stocks is even higher once you factor in the dividend yield of about 5%.
“That gives you 27% total returns,” Lee says. “Last year, the Singapore market outperformed, not only most regional markets, it even outperformed the S&P 500. So at 27%, it’s so much that I think you cannot afford to ignore it anymore.”
See also: ‘Solid’ Singapore property market affirms UOB Kay Hian’s confidence in PropNex
“For those of you who have neglected Singapore, please do not neglect Singapore anymore,” she urges investors.
In 2026, Lee is “constructive” on equities thanks to a benign global economic outlook, supportive central bank policies, stable regional growth and trade flows, “decent” earnings prospects and more attractive relative valuations in Asia compared to the US.
With this, the analyst sees further rotation into undervalued stocks for the year ahead, continued interest in artificial intelligence (AI) beneficiaries, as well as a preference for high-dividend Asian equities. In addition, Lee expects to see renewed attention on rate-sensitive assets given that interest rates are tipped to fall, as well as growing demand for small- and mid-cap (SMID) stocks.
See also: PhillipCapital downgrades Elite UK REIT to ‘accumulate’ following recent share price performance
In her view, key drivers include stable earnings for the banks, which make up about half of the STI. The line-up of over 30 potential listings could also give a lift to capital market related activities and income.
Lee also sees REITs benefitting from lower refinancing costs, which should help with their distributions per unit (DPUs).
Meanwhile, Lee forecasts physical property to continue enjoying “modest yearly price gains” this year with lower mortgage rates supporting demand.
Defensive sectors such as Singapore Technologies Engineering (ST Engineering), Sembcorp Industries and Seatrium have good orderbook visibility.
On the AI sector, the analyst believes that it will still be a “very key and big story” for the next five to 10 years or so. That said, amid the growing adoption of the technology, Lee notes the “rising concern” of a bubble, essentially over stretched valuations and over investments into the sector. Instead, this year would be a “good year” to start discovering other undervalued sectors such as healthcare and industrial.
That said, Lee warns against risks such as a potential slowdown in the region, which will impact external demand; potential oil spikes from the still-evolving situation in Venezuela, which could result in higher operating costs; and the US midterm elections, which are expected to take place in November. “While it is early days now, President Donald Trump’s intervention in Venezuela could also impact voters’ sentiment during the midterm elections.”
As at 4.01pm, the STI is trading 53.16 points higher or 1.14% up at 4,733.66 points.
