Market Performance
The Straits Times Index (STI) has risen 23% year‑to‑date, delivering a fifth consecutive quarter of gains—the longest winning streak in a decade. The index closed at 5,743.59 on the Friday prior to the report.
Economic backdrop
JPMorgan described Singapore’s economy as “Goldilocks,” noting strong technology exports and productivity gains that support growth without generating excessive inflation. The bank raised its STI target to 6,500 on 11 August, implying roughly a 13% upside from the recent close.
Analyst expectations
Fund managers at Jupiter Asset Management and Eastspring Investments also anticipate further upside, citing the expanding economy, a stronger Singapore dollar, a robust wealth‑management sector and ongoing investment in AI‑related infrastructure.
Leading contributors
The rally has been led by the three major banks—DBS Group, Oversea‑Chinese Banking Corp. (OCBC) and United Overseas Bank (UOB)—which all posted second‑quarter earnings that beat analyst expectations. OCBC has outperformed the benchmark, gaining 61% year‑to‑date, the best‑performing stock among the 30‑member STI constituents.
Currency impact
The Singapore dollar has appreciated almost 6% against the US dollar over the past three years, enhancing the market’s attractiveness to investors seeking a haven currency amid geopolitical uncertainty.
Valuation and concentration risks
The STI is currently trading at more than 16 times projected 12‑month earnings, a level that is over two standard deviations above its 10‑year average and the highest valuation since the global financial crisis. Concentration has increased, with DBS, OCBC and UOB together accounting for nearly 60% of the index’s market capitalisation, up from 38% in July 2020. Fidelity International has been trimming its Singapore exposure after share‑price gains outpaced earnings growth.