With Singapore trading at multiples which are higher than historical valuations, Nomura’s APAC equity strategist Chetan Seth is staying “neutral” on Singapore equities for the next year. “Singapore will never be there [at these levels].” he says, “Most likely you will find a country like India or maybe Korea or Taiwan .... So our concern is valuation.”
He reckons “valuation will remain elevated” for 2026 mostly due to enhanced liquidity caused by three reasons. Firstly, he is cognisant that the equity market development programme (EQDP) will support liquidity for Singapore-listed counters.
Next, as fixed deposit rates remain low, higher dividend yielding Singapore stocks are more attractive to investors. The final reason for his view is the “relative safety angle”. Due to the challenging ASEAN market he says that “ a lot of investors are actually just hiding in Singapore”.
“We would not be underweight,” he says. “But you know [at] these levels, if you hold Singapore stocks … you want to add, probably not, because of valuations,” says Seth at an outlook briefing on Asia’s economies, currencies and equities organised by the investment bank on Dec 4.
Seth also articulates Nomura’s outlook for Asia ex-Japan equities. “We are looking for a base case 2026 target of 1035,” he adds. “Currently the index [MXASJ] is around 891 so we're looking for mid teens price returns.”
He expects further expansion in earnings multiples supported by solid earnings growth of 18.5% in 2026 and 13.5% in 2027.
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For China, Seth is optimistic for its 2026 performance. “For MSCI China, our target is 93 … I think the index is around 84-85 level, so looking for 10%, 11% returns,” he says.
Nomura’s equities outlook report outlines the reasons for this projection: predictable US-China relations described as “topsy-turvy” by the bank’s economists; narrowing of divergence between fundamentals and market; and liquidity support from areas such as “ample domestic savings”, potential inflows from global investors and “Beijing's commitment to support the market”.
However, China only ranks third among the markets Nomura is bullish about, with Korea and India number one and two respectively.
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“We think the predominant reason for still looking at Korea, despite a fantastic year, is earnings are going to be solid,”says Seth, who expects a 38% earnings growth for the market. “Even if multiples were to moderate, we think stocks should still be higher.”
Nomura is overweight on Korea and believes that the Land of the Morning Calm is the biggest beneficiary of the AI theme. With strong earnings growth forecasts for the next two years, a re-rate could be on the horizon if the country’s “Value-up” programme progresses as proposed.
On India, Seth is more optimistic now as concerns have eased on US-India tensions. He believes that India is the best diversifier against any unwinding of the AI theme. “India stays overweight for us,” he says.
Thematically, AI still “has legs” says Seth. He provides three reasons for this view. Firstly, the technology is “still evolving” with large language models not yet reaching their full potential. Next, the balance sheets of hyperscalers in the US are very much healthier than companies in the dot.com bubble. Most importantly, demand still outstrips supply. Nomura also forecasts capex by US hyperscalers to increase 33% y-o-y to around US$465 billion.
Nomura’s report notes that the capex boom will benefit Asia as the region is the main supply axis for critical hardware technologies that power the AI revolution.
Riding this wave includes semiconductors, foundries, memory, serve OEMs and hyperscale data-centre assemblers, printed circuit board (PCB) and copper clad laminate (CCL) manufacturers, substrate and connector suppliers, power management, optical networking equipment companies and even cloud/data centre operators listed in Hong Kong and China as they attempt to keep up pace with US technological advancements.
Nomura did sound a word of caution, saying that “investors should prepare for periodic volatility spikes” given “stretched valuations, elevated positioning and ongoing debates around AI sector valuations/funding constraints/supply bottlenecks”. They remind investors of the importance of portfolio diversification and remaining disciplined on growth valuations.
In addition to equities, Nomura also shared their macroeconomic outlook for the world, with a focus on China, ASEAN, India and Asia ex-Japan, as well as providing insights on currency movements.
