Current Trends and Factors Influencing the Singapore Stock Market:
The Singapore stock market is entering 2026 with strong momentum, driven by a confluence of factors:
Positive Outlook: The Singapore stock market is anticipated to outperform expectations in 2026. This is attributed to a combination of policy, liquidity, and technological factors that are reshaping how investors value certainty in an uncertain world.
Sustained Momentum: The market is entering 2026 with accelerating rather than decelerating momentum, suggesting a re-rating of the market rather than just a slow climb.
Macroeconomic Resilience and Structural Reforms: The positive outlook for the Singapore stock market is underpinned by a rare combination of macroeconomic resilience, structural reforms, and valuation support.
"Certainty Premium": In an environment of global political risks and uneven economic growth, Singapore's stability and credibility make it stand out. This is expected to attract accelerated safe-haven capital flows, thereby expanding its "certainty premium."
Earnings Growth: Over the past five years, the re-rating of the Singapore market has been driven more by earnings growth than by P/E expansion. A 9% compound annual growth rate in dividends per share is projected for the next three years, representing a significant shift for income-focused investors.
Small and Mid-Cap Valuations: Despite growth in the past year, small and mid-cap companies are trading at a price-to-book ratio of only 1x, which is 30% to 50% lower than comparable markets.
AI Adoption: Singapore is leading the region in the adoption of artificial intelligence, not just in experimentation but in actual implementation. As use cases scale, operational leverage is expected to kick in, boosting margins and productivity across various sectors, leading to "earnings upside risk."
Accelerated Liquidity: Increased retail participation, an acceleration of initial public offerings (IPOs), and declining interest rates are seen as key catalysts for boosting risk appetite and stimulating a re-rating.
General Purpose and Expected Impact of the Government's Equity Development Programme (EQDP) on Small and Mid-Cap Stocks:
The government's Equity Development Programme (EQDP), with a reported S$5 billion allocation, is generally designed to inject liquidity into the market, particularly targeting small and mid-cap names.
Purpose: The primary purpose of such a program is to stimulate activity and investment in specific segments of the stock market. By providing capital or incentives, the government aims to:
Enhance Liquidity: Increase the ease with which shares of small and mid-cap companies can be bought and sold, making them more attractive to investors.
Support Growth: Encourage the growth and development of smaller companies, which are often vital for economic diversification and innovation.
Improve Valuations: Address potential undervaluation of small and mid-cap stocks by increasing demand and investor interest.
Boost Market Confidence: Signal government support for the local stock market, which can improve overall investor sentiment.
Expected Impact on Small and Mid-Cap Stocks:
Potential for Re-rating: The injection of liquidity and increased investor interest, potentially driven by the EQDP, could lead to a "re-rating" of small and mid-cap stocks. This means their market valuations could increase to better reflect their intrinsic value or growth potential.
Increased Trading Volume: More liquidity typically translates to higher trading volumes, making these stocks more attractive to institutional and retail investors.
Improved Access to Capital: For the companies themselves, a more vibrant small and mid-cap market can make it easier to raise capital for expansion and innovation.
Enhanced Visibility: Government programs often bring increased attention to the targeted sectors, leading to more analyst coverage and investor awareness.
It is important to note that while such programs aim to have a positive impact, the actual extent of the re-rating and the long-term effects depend on various factors, including the specific design of the EQDP, broader economic conditions, and the performance of the underlying companies.
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