As such, the team believes wealth creation is the “next natural step” in Singapore’s economic development after the city-state has achieved “extraordinary economic success” so far. Wealth creation is also a “must have” and not a “nice to have” due to the weakening old world order, an ageing population, threats to Singapore’s population as an energy hub, as well as technology advances.
“In our view, Singapore needs to pursue broad-scale wealth creation to keep its ageing population both happy and healthy - and in doing so could unlock real gains for investors,” writes the team in its June 23 report.
Morgan Stanley has forecasted a five-year GDP compound annual growth rate (CAGR) of 3%, which is the highest among developed economies. It also sees Singapore’s household net assets almost doubling to reach US$4 trillion ($5.1 trillion) by 2030, which is a “tangible sign of real wealth creation”.
To unlock wealth creation, the analysts see three key pillars the Republic should focus on. These are: developing a hub economy status; driving the early adoption of new technologies and reforming the equity market.
“We believe strengthening its leadership position in key hub industries and continuing to adopt technological advancements will yield strong productivity gains for Singapore,” writes the team.
Developing a hub economy status
To this end, the team sees several opportunities for the city-state including it being an energy hub, finance hub, a hub for transport and tourism as well as a hub for data and artificial intelligence (AI) inference.
See also: RHB unchanged on 2025 inflation outlook despite global developments
“About 20% of the world's energy and metals trade takes place in Singapore and it is home to 400 global traders. We expect Singapore to develop itself into a leading liquefied natural gas (LNG) and carbon trading hub too,” says the team, referring to a May study by the Economic Development Board (EDB) and Enterprise Singapore, which estimated that carbon services could generate as much as US$5.6 billion ($7.6 billion at the time) in gross value to Singapore’s economy by 2050.
On finance, the Monetary Authority of Singapore (MAS) already intends to make Singapore a leading financial centre in Asia. The city-state is already globally important in foreign exchange (forex) trade, especially in Asian forex, in addition to it being a major regional insurance hub and a major financing and asset-gathering centre.
“Multipolar world dynamics could see Singapore become increasingly important for international financial services companies,” the team writes.
On transport and tourism, the Morgan Stanley team likes the Singapore Tourism Board’s 2040 roadmap, which targets to reach $50 billion in tourism receipts by the year. The sector currently contributes 3% to 4% of the country’s GDP, Morgan Stanley points out.
New attractions such as Harry Potter World in Sentosa as well as concerts by Taylor Swift, Lady Gaga and Coldplay, in addition to Changi Airport’s new terminal 5 expanding capacity, will support the country’s long-term growth goals.
On data and AI, Singapore, Japan and Malaysia are likely to get a “disproportionate” amount of the investments in data centres in Japan. Asia, including Japan, is on track to account for over a third of global data centre capacity by 2027 with US$100 billion in potential investments this decade. The investments in the three countries mentioned above are targeted for new data centre and/or generative AI (gen AI) investments by the likes of companies like AWS, Microsoft, GDS, as well as other regional and global hyperscalers.
“Singapore currently has 26 subsea cables landing across three sites – one of the highest in Asia – and its domestic infrastructure is set to be upgraded to support 10 gigabits per second (Gbps) broadband speeds within the next five years,” Morgan Stanley points out.
For more stories about where money flows, click here for Capital Section
Adopting new technologies
When it comes to adopting new technologies for wealth creation, the Morgan Stanley team has identified AI, autonomous vehicles (AVs) and humanoids as the ones to help.
Singapore already has success in AI thanks to its early adoption of a national strategy for the industry. At the moment, the city-state ranks among the top 10 AI markets around the world based on several metrics. IT is also home to over 80 active AI research faculties, 150 AI research and development (R&D) and product teams, as well as over 1,000 AI start-ups.
Singapore is also looking at exploring AV opportunities in the region. The country released a provisional national standard in 2019 and has authorised 13 AVs for public road trials. To this end, logistics, sanitation and mobility could be key uses for AVs in Singapore, says the team.
Humanoids are also being increasingly deployed across the country and are used in areas such as cleaning, transport and security. The government also invested about $0.5 billion into the National Robotics Programme. Robonexus, supported by the programme, is supporting local robotics firms, Morgan Stanley adds.
“Of course all of these initiatives need power, and Singapore is investing heavily in building power supplies for the future. This includes 3GW of new green hydrogen and gas-fired power generation capacity by 2030, with potentially another 7GW+ of renewables generation after 2030, including nuclear,” the team writes.
Equity market reforms
Amid Singapore’s plans to become a financial hub, a vibrant equity market is the “missing piece” with many portfolio managers the team has met so far, calling the local bourse “small, safe and boring”.
“With relatively sparse offerings of new economy growth stocks, Singapore is often considered – if it is even considered – by investors as an illiquid safe haven with a handful of investable bank and REIT stocks,” says the team. “This is partly as a result of new industry companies listing overseas, although we believe a higher free float of already listed companies would help reverse this trend.”
However, all this is about to changed with proposed reforms to the local equity market, which should ignite investor and interest and reduce valuation discounts.
As a result of the reforms, the team is expecting the market’s overall return on equity (ROE) to rise to 14%, or 16% in its bull case, by 2030. P/B multiples will also be lifted from 1.7 times to 2.3 times, putting it at similar multiples to higher-rated markets like Taiwan and Australia.
Investing opportunities
Investors looking to position themselves ahead of the equity reforms can look to REITs and small- to mid-cap stocks, which could benefit from the measures specifically targeting this segment.
Singapore is already home to two of the largest listed REITs in Asia, which are CapitaLand Integrated Commercial Trust (CICT) and CapitaLand Ascendas REIT (CLAR). The country, which is the second largest REIT market in Asia, could become the region’s largest by 2035.
The team also sees potential for new small-cap indices to be created to drive investments into the space.
Among the large caps, Sembcorp Industries could benefit from Singapore’s growth ambitions in carbon trading and solutions for industrial customers as well as higher electricity generation needs. “Sembcorp is already one of the highest ROE utilities in Asia [at 18%] and is forecast to maintain that position as it continues to grow.”
DBS Group Holdings is also set to benefit towards a higher ROE wealth business. The bank is also tipped to benefit from the expansion of higher value-add and higher-return wholesale banking services. The team forecasts DBS’s ROE to remain at 18% despite falling interest rates, justifying a P/B multiple of 2 times.
CapitaLand Investment, which is Asia’s largest REIT manager by assets under management (AUM) will benefit from Singapore’s goals to become a regional REIT hub. “Accelerating AUM growth (the company targets $200 billion by 2028) underpins our earnings growth expectations, and we see scope for valuations re-rating from current attractive levels (18 times P/E ratio, 5% dividend yield).
CLAR, which is Asia’s largest new economy REIT, will also likely benefit from Singapore’s continued rise as a regional REIT hub. CLAR is also tipped to receive a boost from the longer-run data centre opportunity of over $1 billion, which could lead to its valuations re-rating from its already currently attractive levels. CLAR has a dividend yield of around 6%.
Genting Singapore, which has stable earnings and dividends, is likely to benefit from the rising tourist numbers, while the Singapore Exchange (SGX) is the natural beneficiary from the equity market reforms as well as Singapore’s ongoing growth as a forex hub and potentially from its growth as an energy trading hub.
The team’s FY2026 and FY2027 NPAT forecasts for SGX are 5% to 7% ahead of the consensus mainly from higher securities volumes forecasted. “Opportunities in forex and energy lead us to raise our bull case multiple to 30 times [SGX’s FY2026 P/E ratio from 26 times previously].”
Beneficiaries of new technology adoption
New technology adoption plays are Nasdaq-listed Grab, which generates over 20% of its revenues and a higher proportion of its ebitda from Singapore. The super-app is also the market leader in on-demand services in the city-state and has its core business having a “wide-reaching impact” across the supply chain.
NYSE-listed Sea is also another beneficiary with its research in cutting-edge technologies, investments in talent acquisition and expanding capital investments in the country. “We see compelling long-term growth for Sea with revenue and ebitda CAGRs of 20%+ and 40%+, respectively over FY2024-FY2027.”
Singapore Telecommunications (Singtel), Keppel and Sembcorp are also touted to benefit from the adoption of new technologies on the island.
“Singtel is currently building Nvidia's accelerated AI factories across Southeast Asia and has a partnership with Bridge Alliance – but the market is currently applying zero value to these offerings,” says the Morgan Stanley team.
“Keppel and Sembcorp are set to benefit from increased demand for electricity and natural gas to power the four trade hubs. Keppel Corp aims to raise $200 billion in AUM to support Singapore's engagement with global economic megatrends including energy transition infrastructure development,” it adds.
