“We are in a bull market. This is still a baby bull,” says the analyst at Maybank’s 2H2025 investment outlook on July 23. So far, the rally has been “very, very narrow”, with mostly the telcos and utilities benefitting, and as such, Wickramasinghe sees “a lot more room” for broadening.
Compared to the US, Singapore still looks “very cheap” based on several valuation metrics including P/E ratios and earnings yields.
Having been in the industry for 22 years and in Maybank Securities for five, Wickramasinghe is understandably excited. This is the first STI bull market after the 2003 to 2008 cycle. “I think there are people in the industry in Singapore who have not seen a bull market [here].”
Confidence in EQDP measures
See also: Tariff uncertainty remains ‘biggest elephant’; ‘self-help’ measures to drive Singapore
The optimism can partly be attributed to the Monetary Authority of Singapore’s (MAS) measures, including its $5 billion Equity Market Development Programme (EQDP).
Since MAS announced the launch of a review group to strengthen the local bourse on Aug 2, 2024, the STI has gained by around a quarter.
Compared to previous attempts at boosting the market, this time around, there is a “whole-of-government approach” which gives more confidence. “You don’t want to bet against the Singapore government when they say they want to do something,” he says. “That’s what’s different this time… [it’s] much more holistic,” says Wickramasinghe.
See also: Asian bonds gain favour as real yields rise and USD weakens: Eastspring
He is “pleasantly surprised” that more than 100 fund managers applied to be allocated a share of the $5 billion EQDP — surpassing his expectations of just 20 managers or so. “Singapore as a market hasn’t been on the radar for investors for a very, very long time,” Wickramasinghe explains. “A lot of the structural issues are still there,” he adds, referring to the market’s yield-heavy focus with not many growth companies and certainly “not one of the sexier markets” in the region.
Meanwhile, he is cheered by the three fund houses picked to manage the first tranche of $1.1 billion: Avanda Investment Management, Fullerton Fund Management and JP Morgan Asset Management. “There is no question of the quality” of their track records, says Wickramasinghe.
Potential beneficiaries from the EQDP
On June 11, Wickramasinghe named 18 potential beneficiaries of the EQDP. His list, which includes transport operators and consumer names, were chosen for their market capitalisations of between $300 million and $5 billion. These stocks also had high governance scores of “strong” or “average” based on Maybank’s proprietary ESG 2.0 ratings.
“This scoring encompasses many SGX small- and mid-caps (SMIDs) not covered by international rating agencies,” said Wickramasinghe in the report. “As secondary criteria, we screen for stocks with higher ADV (average daily volume), strong three-year earnings growth outlooks and high levels of cash to market cap.”
S-REITs were excluded given the bank’s view on the investment mandates. “If you look at the criteria, this announcement solidified base assumptions that they want small and mid caps. They want active strategies, which means trading strategies. So for you to fulfil all those criteria, you cannot go too small, because you will not have the liquidity.
“If you’re institutional and you’re deploying billions of dollars into the market, you will need to have sufficiently sized companies with sufficiently sized trading liquidity to start with,” Wickramasinghe says, noting that his range is a “sweet spot” for institutional investors as they will need “to buy larger volumes without actually being too detrimental to their own returns”.
For more stories about where money flows, click here for Capital Section
Should more trading take place, the smaller second and third liners will also benefit.
Wickramasinghe takes a longer-term perspective when he does his stock-picking. “When we think about institutional money going in, they will obviously be for much longer holding periods,” he explains. “So while you may have some short-term headwinds for some of these companies, when you think about the selection criteria, which is good corporate governance, good liquidity, all those things, they tick a lot of boxes.”
Even though REITs are not beneficiaries of the EQDP, they still have “attractive” dividend spreads relative to domestic risk-free rates, and that this sector could be “next in line for flow rotation” given how interest rates are coming down.
Beyond the sector, Wickramasinghe sees potential in ComfortDelGro. “Everyone says the stock is boring, but we actually think it kind of lagged,” he says. With a $3 billion market cap, strong corporate governance, and a 63% share of Singapore’s taxi market, the company is well-positioned to benefit from the government’s push toward public and shared transport over car ownership.
Another pick is ISOTeam, whose shares have performed well year-to-date. The painting contractor stands to benefit from regulatory requirements mandating buildings to be painted every seven years, as well as the government’s ramp-up in public housing. The analyst also likes that the company uses drone technology to improve efficiency and margins.
While there are no particular sectors to avoid in bull markets like these, Wickramasinghe is a little more “neutral and cautious” on the tech manufacturing sector. “A lot of those stocks have run ahead of expectations... But we also think that this is probably one sector that is still under the threat of tariffs, because there are very specific semiconductor tariffs which the customers and the customers, customers of these companies may actually face, and that will shift the demand dynamics for these companies very quickly.”
Five stars arising
Beyond the EQDP, Wickramasinghe believes that the market could be propped up by five unrelated but supportive themes.
They are:
- Singapore’s domestic resilience despite its high external trade exposure;
- spill-overs from the Chinese stimulus, especially for Singapore corporates with large revenue exposure to China;
- capital returns such as dividends and share buybacks;
- the Johor-Singapore special economic zone (JS-SEZ); and
- the scaling of artificial intelligence (AI).
Singapore’s $14 billion budget surplus could be deployed for fiscal support in the 3Q2025 and offset any external shocks from the baseline tariffs with the US, says the analyst. A surge in activity in the domestic construction sector could also alleviate some downside risks.
A potential consumption-driven revival from the Chinese fiscal stimulus could benefit Singapore corporates, notes the analyst, as nearly two-thirds of the city-state’s top 50 stocks based on market capitalisations have “material revenues” from the country. Given the sizeable exposures, Wickramasinghe believes that Singapore is a “cheap way” to play China.
On capital returns, Wickramasinghe expects dividends to grow by a CAGR of 8% in FY2025 to FY2027 compared to the 6% CAGR in FY2014 to FY2024. The pace of share buybacks, which accelerated to levels not seen in the last seven to 10 years have added to the multi-decade trends that are “happening altogether, all at once”.
The JS-SEZ is also showing “strong progress and commitment” compared to their earlier iterations. To Wickramasinghe, Singapore corporates should benefit from the lower operating expenditures (opex) and higher North-South supply chain market share. The craze over AI, to him, is not merely a basis for punting related stocks but an actual case to help companies improve productivity and therefore returns.
Can the STI hit 5,000 points?
While some analysts believe the STI could reach 5,000 points, Wickramasinghe is more measured. “I would never say never, but to get to 5,000, you need to have a few things lining up,” he says.
The 5,000 mark requires the market P/E to get to two s.d. above its long-term. Even though the market saw that “very, very briefly” post Covid-19, it will need to have some “very hard fundamental factors coming in”, he adds.
When the bull last ran, the market had a return on equity (ROE) of 18%, compared to its current ROE of 11% and up from the ROE of 6% around five years ago. Net profit margins (NPMs) for the overall market were also at 20% in 2008. The market’s NPMs are currently at around 18%, improving from 12% five years ago.
To get to a higher multiple expansion, the market will require expanding margins and ROEs to improve companies’ balance sheets, he says, warning that operating costs in Singapore have risen and corporates will need to find a new wave of efficiencies, such as AI.
He has also observed many companies getting “very lazy” over the last 10 to 15 years, sitting on idle cash piles that ought to be put to work or returned to shareholders. Wickramasinghe agrees that some large caps have gone through a phase of capital restructuring and have made their balance sheets more efficient, thereby driving up ROE, many other companies with inefficient balance sheets have to follow suit.
Best and worst calls
Throughout his career, one of Wickramasinghe’s best calls was to turn bullish on banks early in 2024, amid scepticism over their performance post high interest rates in 2023. “That’s worked out pretty well,” he says.
On the other hand, one of his worst calls was a swash-buckling Hong Kong-based commodities trader Noble Group, which delisted in December 2022 after posting misleading financial statements. Despite short-seller reports and falling prices, Wickramasinghe maintained a “buy” call until it was too late. “That was probably one of the worst calls I have made,” he says with a laugh.
Still, there are moments of pride. In July, Maybank won the Euromoney Awards for Excellence — Singapore’s Best for Research. “When I became head of research for Maybank, we didn’t have any rankings, we were not particularly recognised on the street as a serious research provider or player,” he recalls. “That journey to get us from last to number one has been one of the most fulfilling from a professional point of view.”
“Just putting that team and product together, listening to the clients and delivering a product that is relevant to our clients across the different businesses that we’re in, institutional, retail, wealth, I think that’s one of the highlights.”
