STI Reaches 2007-Level Highs: What Lies Ahead?
The $Straits Times Index(STI.SI)$
In November, the STI index saw a price increase of 5.1% and a total return of 5.8%, with a significant 3.4% rise occurring within three trading days following the unexpected decisive outcome of the U.S. elections.
Investors are keenly analyzing the factors behind the STI's surge:
Short-term perspective:
The Manufacturing PMI in China reached a five-month high, signaling a potential economic revival. This news spurred gains across most Asian stock markets on Monday, December 2.
Singapore's Manufacturing PMI has expanded for 15 consecutive months as of November, with acceleration in growth. The electronics sector, in particular, has been a significant driver of this expansion, likely boosted by preemptive measures taken by businesses in anticipation of President Trump's substantial tariff hikes.
Long-term perspective:
The sustained high performance of the STI in November was largely driven by stellar Q3 results from the local banking trio—DBS, UOB, and OCBC—which have seen their stock prices soar by 52%, 36%, and 33% respectively year-to-date.
The table below illustrates the net institutional inflow and total returns for the top 10 most traded stocks in the first half and the first five months of the second half of 2024, predominantly focusing on the financial services, industrial, and real estate sectors.
Institutional Outlook:
Macquarie maintains a "constructive" view on the Singapore stock market for 2025. According to Macquarie's 2025 Strategic Outlook and Coverage report, the STI target is set at 4,000 points, with an expected EPS growth rate of 5%.
DBS Bank forecasts that external demand will continue to drive growth in manufacturing, trade-related services, and modern services next year. The electronics sector, accounting for nearly half of the manufacturing output, has led the economic growth in the latter half of this year and is expected to remain a key growth driver in the coming quarters. Furthermore, Singapore's critical role in the global semiconductor supply chain positions it to benefit from the growing global demand for AI data centers and servers, with the semiconductor market projected to grow by 12.5% next year.
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