Fifteen months on, the average daily trading volume on the Singapore Exchange jumped to 2,130 million units in May 2026 (as of 19 May 2026), a 54% increase over the average in 2025.
The strong participation was also reflected in the average daily value traded, which rose to $2.33 million in May, up from $1.45 million in 2025, a 61% gain. The 2026 year-to-date daily average so far is $2.07 million. This marks a level not seen since 2007.
During this period, the benchmark Straits Times Index (STI) also surged to several successive all-time highs. It broke past the psychological 4,000 level for the first time in June 2025. Within less than a year, it crossed the 5,000 level. These are two historically strong resistance levels, but both were cleared in quick succession.
These movements raise an important question: Is this a structurally stronger market, or one increasingly supported by liquidity and positioning? And while the surge in trading activity underscores renewed investor interest, how much of this momentum is organic, and is this momentum sustainable?
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The EQDP has clearly played a pivotal role in improving market liquidity. But the durability of these flows remains in question. To me, the next phase of the market will depend on whether organic investor participation can sustain current momentum.
Strength or constraint?
The Singapore story is still evolving and has further legs for growth, both domestically and through participation in global long-term structural investment themes. The base case of no recession in 2026 and 2027 remains intact.
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Singapore offers relative macro stability and attractive dividend yield without the volatility of emerging markets or the high valuations of developed growth markets.
However, this positioning cuts both ways. Capital that flows into Singapore for stability may also be redeployed quickly when higher-growth opportunities emerge elsewhere.
Domestically, construction activities are brisk. The new Changi Terminal 5, as well as other key infrastructural projects, continue to support a strong construction pipeline and benefit the domestic construction industry.
The global ageing population trend will also drive demand for healthcare services and products, benefitting several healthcare providers listed on the Singapore market.
Singapore is also positioned to participate in the AI value chain. While there are no major AI firms listed locally, the country sits at the intersection of three structural AI tailwinds: infrastructure demand, financial services adoption, and government-led digitalisation.
The government’s National AI Strategy 2.0, which aims to secure $1 billion or more in AI investment, reinforces Singapore’s ambition to become a regional AI hub. Some Singapore Exchange-listed companies offer direct and investable exposure to the AI infrastructure cycle through data centre REITs and select technology and engineering plays.
Driven by concentration
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The Singapore market has transformed in the last 10 years, thanks to two key sectors: Banks and property. Both sectors account for almost 67.2% of the Straits Times Index (STI), with banking at about 52.6%, while property and real estate investment trusts (REITs) make up the remaining 14.6%.
This concentration means that headline index strength may mask narrower underlying market breadth. Banks have been the primary drivers of market performance; the FTSE ST All-Share Financials Index has risen approximately 83% since early 2024, significantly outpacing the broader STI.
They have enjoyed net interest margins of about 2% over the last two years, alongside higher fee income from wealth management and credit cards. Banks are also scaling their wealth businesses, targeting a doubling of wealth income over the next four to five years.
Dividend policies have strengthened, with yields of 4% to 6%, positioning banks as attractive income-generating assets.
One risk is that a sector that has driven the market higher is also the one most exposed to cyclical normalisation. Still, banks remain core holdings and with their strong representation in the STI, they should form a key part of a well-diversified Singapore or Singdollar portfolio.
Narrower margin for error
On balance, most sectors will continue to do reasonably well in the coming 12 to 18 months. Some of the key earnings drivers will come from AI, regional expansion, greater wealth inflows into the country and high construction activity.
This could mean the market is moving into a more nuanced phase. Liquidity has improved, valuations have re-rated, and investor positioning is building – but earnings growth remains relatively modest. This combination leaves a narrower margin for error.
The current risk remains heightened geopolitical tensions in the Middle East and the potential inflationary impact of high oil prices. While risk appetite has improved from the March low despite volatile market conditions, key domestic market risks to watch are potential moderation in bank earnings as rate cycles turn, reliance on continued fund inflows under EQDP, and valuation expansion outpacing actual earnings delivery.
The STI is currently trading at 15.1 times current-year earnings, just one standard deviation from the historical average, with an estimated dividend yield of 4.2%. For context, the historical 10-year CAGR is 5.6%, yielding total returns of 9.7%.
Yes, interest in the Singapore market has clearly returned, as reflected in rising trading activity, increased allocations, and strong investor participation (the recent overwhelming participation at The Edge x OCBC Securities Investment Forum in May, for example, was encouraging).
The critical question now is not whether momentum exists, but what will sustain it. The next phase of the market will likely hinge on whether earnings catch up with valuations or liquidity continues to do the heavy lifting.
Carmee Lee is head of equity research at OCBC Group Research
