STI Jumps 1.1% to Hit All-Time Peak as Investors Seek Safety Amid Iran Conflict

Singapore's equity market reached a new historic high as investors turned to defensive assets during the volatility triggered by the Iran war.

The Straits Times Index advanced up to 1.1% on Tuesday, reaching 5,051.28 and exceeding its prior intraday peak from February 23. Key drivers of the increase were Thai Beverage PCL, Singapore Telecommunications Ltd., and CapitaLand Investment Ltd.

The city-state's benchmark index has gained approximately 8.6% year-to-date, contrasting with a 0.3% drop in the MSCI Asean Index. This record was achieved even as a sell-off in technology stocks on Tuesday weighed on equity markets throughout Asia.

In contrast to other Asian markets like South Korea or Taiwan, Singapore's rally has not been fueled by artificial intelligence hype. Its performance this year has been relatively steady and moderate within the region. Following the surge in energy prices due to the war, investors have favored Singapore for its economic and political stability, as well as the attractiveness of dividend-paying stocks, which constitute a major part of its index.

"Singapore's equity market has shown relative resilience amidst persistent global volatility, underpinned by its defensive sector mix and steady inflows," noted Thilan Wickramasinghe, head of research at Maybank Securities. "This has positioned the market favorably."

A government-backed program to enhance Singapore's stock market has also been a contributing factor. The S$6.5 billion Equity Market Development Programme, initiated last year to incentivize selected funds to invest in domestic stocks, aims to improve valuations and widen market participation beyond large-cap companies.

Singapore adjusted its monetary policy stance last month, marking the first Asian economy to respond to heightened inflation risks from soaring energy prices. The resilience of the Singapore dollar, which has outperformed other Southeast Asian currencies since the war began, has further supported the market's ascent.

Additionally, foreign deposits in Singaporean banks rose to S$659 billion in March, the highest level since record-keeping began in 2021, according to data from the Monetary Authority of Singapore.