To The Moon

H2 2025 Outlook: J.P. Morgan Sees Opportunity in S-REITs and Industrial Sectors

Singapore's financial markets are entering the second half of 2025 on a strong note, as both macroeconomic data and market sentiment reinforce each other in a rare show of resilience and optimism. The standout: Singapore's GDP growth for Q2 2025 has significantly outperformed expectations, with manufacturing leading the charge—posting an impressive 5.5% year-on-year expansion. 

This robust economic momentum has been swiftly mirrored in the equity market: since June, the $Straits Times Index(STI.SI)$   has repeatedly broken historical records, reaching a new all-time high of 4,121.43. This marks a more than 20% rebound from the mid-April lows, underlining persistent capital inflows and a renewed sense of confidence among investors regarding Singapore's economic prospects.

J.P. Morgan's latest Singapore equity strategy report for 2H25 highlights that a confluence of external (tariff risk, weaker USD, export front-loading, lower commodity prices, capital inflows) and internal (monetary easing) factors has driven local interest rates sharply lower—by 80–100bps year-to-date. 

This environment, J.P. Morgan argues, is creating a powerful tailwind for structural investment opportunities, particularly for domestic REITs, select high-leverage quality names, industrial champions, and consumer staples.

Singapore-Focused REITs & High-Leverage Quality Stocks

The sharp decline in interest rates has directly lowered funding costs, making Singapore-focused REITs with stable cash flows and well-managed leverage the most immediate beneficiaries. 

J.P. Morgan’s top picks in this space include $CapLand IntCom T(C38U.SI)$  , $CapLand Ascendas REIT(A17U.SI)$  , $Keppel DC Reit(AJBU.SI)$  , and $Frasers Cpt Tr(J69U.SI)$  . These trusts are primarily anchored in domestic assets, thus enjoying the dual advantage of lower borrowing costs and reduced exposure to overseas volatility or FX risk. The report notes that Singapore REITs are poised to outperform their overseas-focused peers, which continue to grapple with rising vacancies, falling asset prices, and currency headwinds.

Meanwhile, the banking sector faces margin compression as net interest margins (NIMs) decline. However, J.P. Morgan remains neutral on banks, citing that resilient dividend yields and robust domestic fund inflows should provide a degree of support, even as the overall yield differential between banks and REITs narrows.

Industrial & Technology Leaders

Industrial and technology blue chips such as ST Engineering and Sembcorp Industries are also in focus. These companies boast strong cash flows and healthy balance sheets, offering defensive qualities in a volatile environment. 

J.P. Morgan points out that $ST Engineering (S63.SG)$ maintains a leadership position in defense and urban infrastructure, while $Sembcorp Ind (U96.SG)$ continues to expand in energy transition and utilities. Both are well-positioned to benefit from ongoing infrastructure upgrades, energy transformation, and Singapore's broader push into advanced manufacturing and smart city development.

SMID (Small and Mid-Cap) Segment

The SMID segment is expected to see a short-term boost, thanks to the Monetary Authority of Singapore's (MAS) S$5 billion equity market reform program, which prioritizes allocations to local fund managers with a focus on small and mid-cap stocks. 

J.P. Morgan recommends targeting mid-caps with a solid record of earnings growth and strong balance sheets, as well as those with asset recycling or monetization potential. Notable names include $UOL (U14.SG)$, $NetLink NBN Tr (CJLU.SG)$, and $ComfortDelGro (C52.SG)$, which have demonstrated robust fundamentals in real estate, communications, and industrials, respectively.

Consumer Staples

In an environment marked by macro uncertainty and external risks, consumer staples—such as supermarkets and F&B companies—have shown remarkable resilience. 

J.P. Morgan highlights $Sheng Siong (OV8.SG)$, $F & N (F99.SG)$, and $ThaiBev (Y92.SG)$ as key picks, citing their stable domestic demand, strong cash flow generation, and defensive characteristics.

Value Unlocking Opportunities

Finally, J.P. Morgan points out that nearly 47% of Singapore-listed companies with a market cap above US$1 billion are trading below book value (PB<1), second only to Hong Kong in Asia. 

This presents significant value-unlocking opportunities, especially if policy or market sentiment turns more favorable. Stocks such as $Olam Group (VC2.SG)$, $Frasers Property (TQ5.SG)$, $CityDev (C09.SG)$, and $Wilmar Intl (F34.SG)$ are cited as prime candidates for a potential re-rating, given their substantial book value discounts and latent asset monetization potential.

Morgan's strategy is clear: focus on domestic REITs, industrial-tech leaders, quality mid-caps, and consumer staples, while keeping an eye on value stocks poised for re-rating. As capital continues to flow in and local fundamentals remain robust, these themes are expected to drive Singapore's equity market performance in the months ahead.

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