Singapore Market 2026 Outlook: From Sentiment-Led Gains to a Policy-Driven Structural Re-rating

The Singapore equity market enters 2026 riding a wave of unprecedented momentum. In 2025, the $Straits Times Index(STI.SI)$   defied global volatility to deliver a stellar total return of over 22%, ending the year at record highs above the 4,650 level. 

This performance was potentially underpinned by a robust electronics upcycle, a "safe haven" rotation amid global trade tensions, and the initial anticipation of sweeping market reforms.

As we look toward 2026, the narrative is shifting. Market focus is transitioning from a sentiment-driven recovery to the tangible execution of structural "Institutional Dividends."

Unlocking Liquidity: The 2026 Policy & Market Timeline

The "Singapore Discount" is being systematically addressed through a series of liquidity-focused initiatives reaching critical milestones this year.

Harvest Season for Policy Dividends

Based on the February 12 Budget 2026 Statement, the government is accelerating the National AI Strategy 2.0. Key initiatives include enhanced AI Vouchers for SMEs and larger, targeted grants for high-potential AI startups. Simultaneously, the S$5 billion Equity Market Development Programme (EQDP) enters a critical phase; the second and third batches of appointed asset managers are expected to deploy significant capital into mid-cap stocks, aiming to boost turnover and price discovery outside the main STI constituents.

Reshaping Market Microstructure

The roadmap highlights structural shifts reaching potential fruition in 2026:

The SGX-Nasdaq Bridge: Set for a mid-2026 operational launch, this enables quality Asian growth firms (with market caps >S$2B) to dual-list via a single set of offering documents, bridging the valuation gap with US markets.

Lot Size Reduction: By Q3 2026, SGX will reduce the board lot size from 100 to 10 units for stocks priced above S$10. This democratizes access to high-priced blue chips like the "Big Three" banks, inviting a new wave of retail participation.

Regional Connectivity: With the RTS Link scheduled to begin operations by December 2026, the Johor-Singapore Special Economic Zone (JS-SEZ) is no longer just a concept. This "Twin-City" model allows Singapore-listed firms to "twinning" their high-end financial headquarters with cost-effective manufacturing hubs in Johor, unlocking a growth frontier for industrial REITs, telecommunications, and developers.

JP Morgan's Strategy: High-Quality Defensive Growth

JP Morgan has adopted a "High-Quality Defensive Growth" stance for Singapore in 2026. 

This strategy prioritizes companies capable of capturing local policy tailwinds while executing internal strategic resets.

The "Magnificent Seven" Selection:

JPMorgan named seven stocks as its top Singapore picks for 2026:

$DBS Group Holdings(D05.SI)$  : The cornerstone pick. Benefitting from wealth inflows and a massive S$70 billion cash pile rotating from deposits back into equities.

$Sea Ltd(SE)$  : The premier "Growth" engine, well-positioned for the SGX-Nasdaq sentiment bridge as its e-commerce and gaming margins continue to stabilize.

$Keppel (BN4.SG)$ & $ST Engineering (S63.SG)$: Both represent structural industrial strength. ST Engineering enters 2026 with a record S$32.6 billion order book, while Keppel’s pivot to an asset-light manager is driving a fundamental re-rating.

$Singtel (Z74.SG)$: A top recovery play fueled by aggressive asset recycling and the doubling of its regional data center capacity.

$CityDev (C09.SG)$ & $CapLand IntCom T (C38U.SG)$: CDL remains a prime "Value Unlock" candidate trading at a steep discount to RNAV, while CICT provides a high-quality defensive moat with attractive distribution yields.

Conversely, it listed UOB and Yangzijiang Shipbuilding as its least preferred stocks.

The Road Ahead: 2026 Market Outlook by Institutions

Entering 2026, the institutional consensus is constructive and robust. The 2025 surge is viewed not as a peak, but as the foundation of a multi-year bull cycle.

– DBS Bank has set a year-end 2026 target for the STI at 4,880, implying an 8% upside from current levels, supported by an accelerating EPS growth of 8.8%.

– Institutional Consensus suggests that as global funds remain under-positioned in ASEAN, a rotation of the estimated S$70 billion cash pile in Singapore deposits back into the equity market could drive a multi-year bull cycle.

Singapore is no longer just a "dividend play." With structural reforms breaking valuation ceilings and a stable macro backdrop, the "Little Red Dot" is emerging as a perfect destination for global capital seeking both safety and growth.

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