"The STI has continued to reach fresh record highs each week into 2026, driven by upbeat earnings outlooks, a strong Singapore dollar (SGD), high dividends, and its status as a safe haven amidst global geopolitical uncertainties,” they write in their Jan 28 report. The STI closed at an all-time-high of 4,923.02 points on Jan 27.
To the analysts, the rally has “extended legs” due to the value-unlock initiatives proposed by the Monetary Authority of Singapore’s (MAS) equity market review group.
Further development of [the] value-unlock initiatives should enhance corporate ROE (return on equity), flows, and price discovery,” the analysts note. “Small and mid-cap stocks could stage a catch-up rally driven by EQDP (equity market development programme) funds disbursement and broadening of the investor base.”
Since the market review group was announced in August 2024 and the EQDP in February 2025, equity prices rose along with trading liquidity. Equity raising activity has also picked up with 57 deals closed, raising US$3.7 billion ($4.67 billion) in the primary and secondary markets in 2025. Majority of the deals - 79% in value - were from the real estate sector.
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The momentum doesn’t seem to be stopping anytime soon with further reforms expected this year. “At the inaugural Singapore Equities Forum on Jan 9, the government highlighted initiatives focusing on: Developing market-making initiatives to tighten spreads and improve execution; enhancing retail accessibility by reducing lot size[s]; modernising the Central Depository (CDP)’s post-trade custody model; and improving global connectivity via the SGX-Nasdaq dual listing bridge,” say the analysts.
‘Strong catalysts for SMIDs’
After a significant outperformance in 1H2025, small- and mid-cap stocks (SMIDs) — which were tipped to the biggest beneficiaries of the EQDP —slowed, lagging the large-caps by over 7% over the last three months.
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Yet, the analysts believe there are “strong catalysts” for the sector over the next three to six months, citing the disbursement of the second tranche of EQDP funds and the remaining allocation from the first tranche among others.
The MAS placed $1.1 billion with the first batch of three asset managers in July 2025 and another $2.85 billion to the second batch of six asset managers in November 2025. The second tranche of EQDP funds will be disbursed around 1Q2026.
“Assuming an allocation of [around] 30%, the inflows to SMIDs could amount to nearly US$1 billion, more than six times the average daily traded value of Singapore Next 50 Index,” the analysts write.
“SMID stocks have seen liquidity and coverage increase meaningfully in 2025,” they add. “In our view, the combination of inflows and better visibility should lead to a rotation of investment flows into SMID cap stocks.”
That said, the analysts’ top picks remain large caps: DBS Group Holdings, UOL, Keppel Limited, City Developments Limited (CDL), Singapore Technologies Engineering (ST Engineering), Singapore Telecommunications (Singtel) and NYSE-listed Sea Limited.
JP Morgan has “overweight” calls on DBS, UOL, Keppel, CDL, ST Engineering and Singtel.
