• Singapore has announced a set of measures aimed at revitalising the local equity market, with a focus on demand-side strategies. Key initiatives include a SGD5bn Equity Market Development Programme (EQDP), tax exemptions for fund managers investing in Singapore-listed equities, and requirements for single family offices (SFO) to invest in local stocks. While more clarity is needed regarding the fund focus and there may be some concerns about the delisting trend and quality of listed companies, we view the steps announced as positive for Singapore equities.
• Key beneficiaries. i) Singapore Exchange (SGX SP), NEUTRAL, TP: SGD13.60 should benefit from increased listings and higher trading in stocks beyond the stock components of the Straits Times Index (STI). Other beneficiaries include banks and broking houses such as DBS (DBS SP), BUY, TP: SGD51.20, OCBC Bank (OCBC SP), NEUTRAL, TP: SGD16.80, UOB Kay Hian (UOBK SP), NR, and iFAST (IFAST SP), NR; ii) Large companies with strong financial performance and steady dividend growth may benefit as the EQDP does not restrict fund managers from investing in the index component stocks. Key beneficiaries, which are part of our Singapore equity investment strategies, include banks, REITs, and companies offering high-dividend yields; iii) small cap companies, where we currently prefer APAC Realty (APAC SP), BUY, TP: SGD0.42, Frencken Group (FRKN SP), BUY, TP: SGD1.71, Centurion Corp (CENT SP), BUY, TP: SGD1.16, Riverstone (RSTON SP), BUY, TP: SGD1.20; iv) investment banking and advisory firms may benefit from increased attraction for entrepreneurs to acquire undervalued listed small companies to inject their own profitable companies into the acquired public entity or privatise the ones with strong cash flow and relist them later when the valuation multiples are higher; v) we also expect fund management houses that have already run sizable Singapore equity-focused mandates to benefit.
• Remaining positive on the Singapore market. We believe Singapore banks now provide investors with strong defensive options as downside risk for the banks' earnings should be minimal because fewer US Federal Funds Rate (FFR) cuts are now anticipated. The banks also offer strong dividend yields. This improved outlook for Singapore banks, which account for 50% of the STI, should benefit the Singapore market. Other grounds for an optimistic prognosis for the local market include its compelling forward valuation in relation to regional markets, while offering reasonable earnings growth, as well as strong dividend yields and exposure to relatively stable currency.
• Our investment themes: Build positions in: i) Stocks that offer sustainable earnings growth or are undervalued; ii) stocks (except REITs) that offer sustainable high yields; iii) stocks that will help mitigate the increased near-term volatility risk; iv) stocks that will benefit from the longer-term development of the Johor-Singapore Special Economic Zone (JS-SEZ); v) small-cap stocks with earnings tailwinds; and vi) gradually building positions in the REITs sector as interest rates are expected to eventually decline.

Source: RHB Research - 24 Feb 2025