As he does regular weightlifting, Wickramasinghe, in his day job of parsing the markets, is projecting that the Straits Times Index (STI), already up 18% last year to around 3,800 points now, can be further lifted to above 4,000 points this year to set a new record.
He recalls very low expectations in early 2024, but as the year went by, the upgrades started coming. This year, as the effects of the US and China’s respective policies come through, he expects the same pattern to form. “The risk is on the upside,” says Wickramasinghe.
Koh, the fengshui master, warns of a “wave of pandemics” from central parts of China, the Middle East and Africa, so “don’t throw your masks away”. However, he is hopeful that with the recent experience from the Covid-19 pandemic, there is better preparedness all around. According to Koh in the annual Maybank Securities fengshui guide, “stocks, equities, and finance are in sterling positions, and Southeast Asia will be a big beneficiary of this strength”.
Four themes
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Wickramasinghe acknowledges what many critics have pointed out — that the STI’s gain last year was only because of the rally in the three local banks, plus a couple of other non-financial stocks such as Singapore Telecommunications (Singtel). He expects the likes of United Overseas Bank (UOB) to continue to deliver more returns. Still, other Singapore companies will help make this a broad-based gain for four thematic reasons.
First is the impact of what US President Donald Trump will do. On Jan 14, Pete Hegseth, Trump’s nominee as the defence secretary, could not name a single Asean country when asked by Thailand-born US senator Tammy Duckworth. “I’m actually happy. If they can’t find you, they can’t hurt you,” says Wickramasinghe, referring to the threats of tariffs that Trump has been lobbing to the chagrin of a growing list of trading partners.
Specifically, among all Asean countries, Singapore is the only country to run a trade deficit with Uncle Sam. Plus, a free tree agreement has been in force since 2004. As Trump wields threats of tariffs on China, Mexico and Canada, more and more businesses will look to relocate to Southeast Asia, benefitting many Singapore companies and not just the banks, says Wickramasinghe.
See also: Opportunities abound in Singapore market after STI correction in May: DBS
Next, China’s slowdown has been a closely watched development. Numerous STI companies have significant exposure to China and Hong Kong, with the proportion of revenue ranging from as high as 95.8% for Hongkong Land Holdings to 52.1% for Wilmar International and 22.5% for DBS Group Holdings. Investors have given significant discounts to these companies’ exposure in China. Wickramasinghe is optimistic that China’s stimulus measures will take effect with the government putting its spending where its mouth is. “As China starts to accelerate, a lot of those earnings will start to show up in those companies,” he reasons.
The third theme that might drive performance this year is the proactive capital management of local companies. As Wickramasinghe observes, many companies — not just the big caps — hold “massive” amounts of cash on their balance sheets.
Wickramasinghe believes that many more of these companies, recognising the need to improve shareholders’ value, will emulate the various government-linked entities such as Singtel and Keppel in either buying back shares or dishing out higher dividends in the coming few years and, therefore, a positive for yield-seeking investors here.
Last but not least, the interest in artificial intelligence (AI) is set to continue. Wickramasinghe points out that many big companies, having spent heavily to beef up their AI capabilities, will start to see productivity gains come through and accelerate. “If you want to play the AI theme in Asia, Singapore is one of the best players to do it, and that’s also because the government is behind it with the national AI policy,” reasons Wickramasinghe.
‘Super catalysts’
Several “super catalysts” exist for Singapore too. Firstly, the Johor-Singapore Special Economic Zone (JS-SEZ) agreement has been signed, but reservations exist given the spotty bilateral ties between the two closest neighbours.
“We think that this time it’s for real. Both governments are very keen on making this happen. There will be lots of opportunities for companies in Singapore to reduce their costs and increase their revenue,” says Wickramasinghe.
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DBS, which has a scant presence in Malaysia, unlike Oversea-Chinese Banking Corp (OCBC) and UOB, is reportedly in talks to buy over a 29% stake in Malaysia’s Alliance Bank that is now held by a vehicle that is, in turn, is 49%-owned by Temasek. Such a transaction would require the blessings of regulators and Wickramasinghe believes that if this deal materialises, it will signal that both countries are more open to deeper ties.
Meanwhile, Maybank Securities favours UOB among the three banks. Besides the SEZ theme, UOB has a broader and deeper footprint across Asean. “As supply chains move, UOB will benefit the most because they have invested a lot in integrating their Southeast Asian businesses. That’s very critical,” Wickramasinghe explains.
Also, the Monetary Authority of Singapore is leading a comprehensive review to help revive the overall vibrancy of the Singapore equities market. Wickramasinghe acknowledges many investors are sceptical and that the lengthy wish-list put forward by various stakeholders will not be fully fulfilled. “But I think at least a few things will happen — the regulatory burden will be reduced and allow companies to list a lot more easily,” he suggests.
Last but not least, with elections to be called by November, the upcoming Budget on Feb 18 is widely expected to be generous and provide support for Singapore’s economy. “All in, I think the STI will punch through 4,000 this year. Now, this looks like a fairly low target. It is only about 6%–7% upside from here and the risks are for us to upgrade this number,” says Wickramasinghe.
In the following links, The Edge Singapore team presents 12 stocks to watch in the Year of the Snake and hope your wish of a prosperous and bountiful year will come true.
- Our 2025 picks: UOB — Banking dilemma throws up a dark horse
- Our 2025 picks: Keppel DC REIT — Safe investment with recurring income
- Our 2025 picks: Hongkong Land — A property giant poised to stretch
- Our 2025 picks: Beng Kuang Marine — Asset-light model to ride industry growth
- Our 2025 picks: Wilmar International — Improving margins, yield play and support from shareholders
- Our 2025 picks: Winking Studios — Capturing growth via M&A
- Our 2025 picks: Seatrium — On course to return to profitability in FY2024?
- Our 2025 picks: Thai Beverage — Spinoffs a reason to raise a glass to F&B giant
- Our 2025 picks: Singapore Exchange — Uplift in valuation multiples?
- Our 2025 picks: Credit Bureau Asia — Steady growth banking on niche offering
- Our 2025 picks: Singapore Post — 'Yes' to divestments could unlock shareholder value
- Our 2025 picks: Grand Venture Technology — Recent run looks set to continue with sector upswing
