On the other hand, the team foresees small- and mid-caps to do well, as funds from the equity market development programme (EQDP) are deployed. The second tranche of the $5 billion funds, amounting to $2.85 billion, were placed with six asset managers. Similar to the first tranche, the team expects to see deployment within the next one to two quarters. The funds are also expected to crowd in third-party capital. With this, the team expects liquidity in the market to continue broadening out beyond the FTSE Straits Times 30.
Sector-specific forecasts
In 2026, the team are expecting the banks to experience revenue headwinds as the cumulative, compounding effect of the lower Singapore overnight rate average (Sora) rates kicks in. The analysts expect the three-month Sora to reach sub-1% by mid-2026.
Within the financial sector, the team’s top pick is iFast, which isolates the strong wealth sector performance. “ The company is levered to rising wealth assets, and in 2026 has an additional catalyst as its e-Pension division completes onboarding works for its project in Hong Kong.”
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Among the three banks, Oversea-Chinese Banking Corporation (OCBC) is the team’s relative pick. It has a non-consensus “underperform” rating on DBS Group Holdings, which hit new highs on Jan 6.
The real estate sector is likely to benefit from the lower rates and continued US easing. The team, which is “overweight” on the industry, likes CapitaLand Investment (CLI), CapitaLand Integrated Commercial Trust (CICT), Parkway Life REIT (PLife REIT), Mapletree Logistics Trust (MLT), Mapletree Pan Asia Commercial Trust (MPACT) and Frasers Logistics and Commercial Trust (FLCT) among the others.
Telecommunication companies (telcos) are expected to see their mobile average revenue per user (ARPUs) to recover in 2H2026 earlier, after a period of digestion post-consolidation. In August 2025, Simba, the wholly-owned subsidiary of Australian-listed Tuas, said it was acquiring Keppel’s M1 for an enterprise value of $1.43 billion. The acquisition excludes M1’s information and communications technology (ICT) businesses. Singapore Telecommunications (Singtel) is the team’s “top pick” as it is the largest telco player by market share and is the clear beneficiary of any ARPU repair in Singapore. Singtel, which owns artificial intelligence (AI)-related businesses, will also allow investors to benefit from both sides of the AI trade.
See also: Singapore’s economy grew by 'stronger-than-expected' 4.8% in 2025, says PM Wong
The plantations sector should see a rebound in crude palm oil (CPO) prices. “We view [the] current CPO price weakness as temporary and expect a rebound when production starts to taper in 1Q2026. We forecast CPO price[s] to average RM4,300 ($1,358.70) per tonne in 2026,” says the team. First Resources is the team’s favourite among the plantation counters.
The outlook for industrials is likely to be a “mixed bag” with expectations of lowered demand. The Energy Market Authority (EMA)’s latest forecast reduced peak electricity demand over 2026 to 2031 by 7% to 16%, making this the second reduction since EMA proclaimed an apparent capacity shortage in 2023. This led to a series of capacity additions totalling 2.5GW or 20% of total capacity in 2024.
“As such, EMA's latest forecast projects Singapore's reserve margin to rise to 54% by 2029, instead of declining to the statutory limit of 27% - a complete change in the supply outlook. And given that reserve margin now remains above the statutory limit for the foreseeable future, EMA stated in its forecast that "no additional generation capacity will be needed in 2030’.”
In 2026, electricity demand is likely to be underpinned by demand for data centres and new advanced manufacturing industries such as semiconductors. The recent Data Centre - Call for Application (DC-CFA2), which was launched on Dec 1, 2025, will be key for the industry.
The sector has two key players, Sembcorp Industries and Keppel. While the team sees Sembcorp’s share price to be range-bound given the challenges within the sector, it prefers Keppel as its diversified businesses and asset monetisation plans will better shield its share price to the sector’s challenges.
The Jardine group of companies is likely to see a good year with its ongoing restructuring. “Asset disposals through 2025 accelerated to US$3.5 billion ($4.48 billion) with the group redeploying cash into buybacks at subsidiaries and special dividends,” the team writes.
For Jardine Matheson, the team sees several catalysts, including the closure of the Mandarin Oriental transaction in December 2025 and further potential monetisation of the One Causeway Bay site, to support the rerating to its US$80 target price. The team is also bullish on DFI Retail Group
Among Macquarie’s Asean coverage, CLI and iFast are the two Singapore names that stand out. Both have consistent earnings growth with their two-year NPATs having a compound annual growth rate (CAGR) of 5% or higher, “outperform” ratings and were recently updated by the team’s analysts in the past quarter.
