US market not the only game in town
Singaporean investors may be missing out on some gains if they neglect their home market. The local equities market has been on a tear ever since the government announced the formation of a review group to create measures to strengthen the Singapore stock market in August 2024. The group’s final report was released on Nov 19 last year.
On Feb 12, Singapore’s flagship Straits Times Index (STI) passed the 5,000-point mark for the first time. This comes after the STI crossed 4,000 points for the first time on March 28, 2025. The STI has since fallen below 5,000 points though it remains much higher than where it was in 2024. As of March 9, the STI is up 47% to 4,756 points, from 3,235 points on Aug 12, 2024.
Of course, the gains you can make on the STI depend on when you entered the market. If you had invested in the STI right before the start of the Global Financial Crisis in 2008, then you would see an annualised total return of 5.56% if you exited in 2025.
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Conversely, if you had entered at the start of 2025 and exited at the end of the year, then you would have made a gain of 28.49%, a nearly six-fold increase from the former case. Investing in the S&P 500 over the same period would have only given you a 17.9% return.
Chee Hong Tat, minister for national development and deputy chairman of the Monetary Authority of Singapore (MAS), acknowledged the rally in the STI during his remarks at the 60th anniversary celebration of the STI held at Singapore Exchange Group (SGX) Centre’s IPO Arena on Jan 5.
“Last year, STI’s total returns were over 28%. If we take a longer, five-year view, its total returns were over 100% in Singapore-dollar terms, outperforming other regional markets.”
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Underrated gem
It is easy to deride the STI as boring given its constituents. The three local banks — DBS Group Holdings (DBS), Oversea-Chinese Banking Corporation (OCBC) and United Overseas Bank (UOB) — make up more than half the total weight of the STI. The remaining 27 constituents include a mix of government-linked companies like Singapore Telecommunications and Keppel, real estate developers like City Developments, and foreign companies such as Hongkong Land and Jardine Matheson.
Being boring may not be a bad thing for the STI, says Emelia Tan, director of SGX’s capital market development team. The index’s stability when compared to its regional counterparts means it provides defensive resilience. “While the other markets have swings, volatility and whatnot, Singapore’s returns tend to, on a longer term, be a bit more defensive and resilient.”
Recently, when other regional markets such as Korea’s went on a wild yo-yo in reaction to the latest war in the Middle East, the STI, in contrast, maxed out at around 2% either way.
That stability is what makes the STI a reliable investment for people, says Raphael Lim, associate director for SGX’s capital market development team. This is on top of other macroeconomic factors such as the interest rate environment as well as the government’s push to channel capital into the local stock market via the $6.5 billion Equity Market Development Programme.
“For investors in Singapore, if you are investing with a long-term goal and your liabilities are denominated in Singapore dollars as well, having some asset-liability matching is quite useful in your portfolio,” Lim says. “In future, if you are going to spend a lot of Singapore dollars for your retirement, for your house, for whatever purposes that you might have, the natural hedge is quite useful.”
The Singapore dollar trade-weighted exchange rate has been on a “gradual appreciating path” since October 2021, says the MAS. Earlier this year, the Singapore dollar rose to its strongest level against the US dollar since October 2014 at $1.2679 per US$1.
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“We are not saying that every investor should have only STI in their entire portfolio, but it is relevant for every investor’s portfolio, especially for those based in Singapore; your expenses [and] earnings here are in Singapore dollar terms,” says Tan.
The STI and the economy
To SGX’s market strategist Geoff Howie, the STI, which mirrors Singapore’s evolving economic landscape, should reflect the gains from AI.
The blue-chip index has been through at least three iterations since it first began as the Straits Times Industrials Index (STII) in 1966.
At the time, the STII recorded an average of double-digit price gains every year in its first 30 years, which mirrored Singapore’s economic growth when it switched from an import substitution economic policy to an export-oriented one.
In 1998, the index was rebranded to the STI before undergoing another change in 2008 as part of a new partnership between Singapore Press Holdings, SGX and FTSE Russell.
For Howie, the STI’s history illustrates how closely the benchmark has tracked Singapore’s economic transformation over the decades. The early dominance of industrial companies first reflected the country’s manufacturing push, while later shifts in the index mirrored Singapore’s growing role of financial institutions and multinational companies.
Howie believes that the next stage of the index’s evolution should reflect Singapore’s ambitions in technology and AI.
“Singapore has a lot of strengths in the AI world. Having the most digital engagement agreements with the rest of the world helps the G2G (government to government) process for a lot of companies when they’re expanding overseas,” Howie says. “We rank number one or very highly in AI competitiveness, AI readiness. And of course, we’ve got the cloud infrastructure.”
“That means this is a true economic driver for the next, you know, five to 10 years,” he adds.
Still, Tan notes that many STI companies now earn a sizeable share of revenue overseas, which could mean that the index may no longer be a direct reflection of Singapore’s domestic economy.
Taking STI to the next level
For most market watchers, reaching the 5,000 mark is just the beginning. In October 2025, DBS Group Research’s group head Timothy Wong predicted that the STI will reach nearly 10,000 points by 2040. “Historically, the STI has decisively broken above multi-year resistance to set new all-time highs only twice, once in 1993 and again in 2006,” he said.
Wong’s prediction isn’t that far-fetched, says Howie. Of course, going to 10,000 points will require a confluence of factors coming together. “You have to see the currency move to parity. You have to see the GDP double. But look, we have done this all before,” he adds.
“That 10,000 target based over a 15-year period is pretty much the long-term average of the STI since its inception in 1966 anyway. If we can stay on track and not have any of these valuation gaps where we have our GDP far outpacing the actual benchmark, then I think we stand a chance of achieving some of these very ambitious targets.”
Looking ahead, Howie says bringing in new listings will be crucial in sustaining the STI’s rally. “We need new players to come in and carry the torch up to 2030, so we are very focused. Our targets, per se, are bringing in new companies [and] new players into the STI, to take it to the new levels.”
To do this, SGX has extended its focus into pre-listings. This will allow the exchange to better identify emerging industries that will not only produce new IPOs but new constituents for the STI as well. The MAS has extended the Grant for Equity Market Singapore (GEMS) research scheme to cover the private markets as well. Smartkarma was the first company to be awarded a grant to provide research on pre-IPO companies.
“We are actually trying to focus a little bit more on the newer kind of sectors that build on our traditional strength,” says Tan. “Let’s say banks are our traditional strength. Then, the newer areas would be fintech for example. We have done very well as a fintech start-up hub but in terms of listings, we don’t really have much of that over here.”
For SGX, expanding the equity research ecosystem is not just about identifying unicorns or champions. Instead, it aims to help build up entirely new economic clusters with a slate of companies looking to go public.
“When there’s a cluster, investors can perform peer comparison. They can do benchmarking. That’s what we are trying to do with the GEMS research scheme and with private market research, so that from a research ecosystem standpoint, we are moving a little bit more upstream,” Tan says.
Staying relevant
While retail net inflows into local equities reached a five-year high of $2.62 billion in 2025, Howie says the figure still has not surpassed 2020’s high of $9.6 billion, when investors were picking up stocks at significant discounts.
Most of 2025’s inflows came from the three local banks. According to SGX, DBS, OCBC and UOB led with a combined net inflow of $3.88 billion. The rest of the Singapore stock market saw a net retail outflow of $1.26 billion.
When asked why Singapore’s stock market should matter to local investors, Howie says it is about giving retail investors a “good enough” reason to participate. “So the challenge for all of us is to give them that ‘good enough’ reason,” he says.
For Tan, the stock market is one way for Singaporeans to invest and build wealth over time. While Singaporeans are good savers, active investing remains limited. “There’s still a lot that we can try to do to bridge that, through either new products [and] board lot size reductions.”
In fact, Lim says investors may be missing out on gains that can come with having some exposure to the Singapore market, whether it be investing in the city-state’s blue chip companies or reinvesting their dividends to enjoy compound growth.
“We’re not saying that the market will always go up,” Lim says. “We cannot predict that naturally, but I think on the historical basis, we do see that being a way for investors to participate [in the stock market].”
