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Singapore Equity Strategy Summary

Core Content

Singapore equities had a strong performance in 2024, with the MSCI Singapore Index rising by +30%, marking its best year since 2009. This outperformed regional and global indices, including the MSCI ASEAN (-16%), MSCI APxJ (+8%), and global equities (+16%). The performance was driven by the Financials sector, which accounted for +32% gains and represented 55% of the index weight, with major contributors being the three Singapore banks and SGX. Other significant performers included Singtel (+25%) and Sea Ltd (+162%), which were also major index weights. In contrast, the Consumer and Real Estate sectors underperformed, with the latter suffering ~20% losses. Four Real Estate stocks were removed from the MSCI Singapore Index due to falling below market cap thresholds.

2025 Outlook

Singapore is expected to continue its strong performance in 2025, driven by market reform measures that could enhance liquidity and push market multiples higher. These reforms are anticipated to provide a positive catalyst for the Singapore equities market. The relatively challenging backdrop for regional markets, influenced by US policy shifts, is expected to encourage investors to pivot towards defensive allocations, with Singapore being a safe haven.

Investors should monitor the substance, severity, and sequencing of new US policies, as these factors are critical in shaping investment outcomes. The Singapore Focus List, an equally weighted portfolio of key stocks, has shown consistent outperformance relative to the MSCI Singapore Index.

Key Stocks and Analyst Ratings

Focus List (Top 5)

• Singapore Exchange (SGXL.SI): Analyst: Nick Lord, Rating: Overweight, 12-month target: +12%, 12-month performance: +30%
• United Overseas Bank (UOBH.SI): Analyst: Nick Lord, Rating: Overweight, 12-month target: +1%, 12-month performance: +28%
• Singapore Telecom (STEL.SI): Analyst: Da Wei Lee, Rating: Overweight, 12-month target: +27%, 12-month performance: +25%
• SembCorp Industries (SCIL.SI): Analyst: Mayank Maheshwari, Rating: Overweight, 12-month target: +30%, 12-month performance: +4%
• CapitaLand Investment Ltd (CAPN.SI): Analyst: Wilson Ng, Rating: Overweight, 12-month target: +51%, 12-month performance: +25%

Analyst Rating Changes in 2024

• SGX: Rating changed from UW to OW
• STEL.SI: Rating changed from EW to OW
• KPLM.SI: Rating changed from EW to OW
• SIAL.SI: Rating changed from EW to UW
• GENS.SI: Rating changed from OW to EW

Valuation Metrics

MSCI Singapore Index (as of 31-Dec-2024)

• Index Value: 1,725
• P/E (NTM, X): 13.6x
• DY (NTM, %): 5.3%
• P/B (NTM, X): 1.6x

Target for 2025

• Index Value: 1,900
• P/E (NTM, X): 14.2x
• DY (NTM, %): 4.1%
• P/B (NTM, X): 1.7x

Equity Flows

• Active vs. Passive Flows: The data shows a mix of net buying and net selling across different sectors. The Financials and Telco & Tech sectors have shown positive net flows in several months, while Real Estate and Consumer sectors have experienced negative net flows in some periods.
• Cumulative Flows (2010–2024): Exhibit 7 highlights the cumulative equity flows, indicating a net outflow in the early part of the period but net inflows in later months.

Short-Selling Activity

• Top Short-Sold Stocks: Sea Ltd (GENS) had the highest short-sale percentage of turnover at 55%, followed by Grab (CLAR) at 25%, Capitaland (CAPN) at 25%, Sea (SE.N) at 4.3%, and Grab (GRAB.O) at 2.8%.
• Z Scores: These indicate the deviation from the 5-year average, with GENS showing the highest Z score at 2.8, suggesting a high short interest.

Sectors and Stocks: Net Buying/Selling

• Financials: Consistently showed net buying in most months, indicating strong institutional confidence.
• Real Estate: Expressed net selling in several months, reflecting market challenges.
• Consumer: Showed a mix of net buying and selling, with some stocks like Wilmar International (WUL.SI) and Genting Singapore (GENS.SI) experiencing significant net buying in certain months.
• Telco & Tech: Exhibited net buying in many months, with Singtel (STEL.SI) and Sea Ltd (SE.N) as notable performers.

Summary of Key Points

• Strong 2024 Performance: Singapore equities outperformed regional and global indices.
• 2025 Outlook: Expected to continue outperforming due to market reforms and defensive investor sentiment.
• Focus List: Key stocks such as SGX, UOB, Singtel, SCIL, and CAPN are highlighted as overweight in the portfolio.
• Valuation: The MSCI Singapore Index is expected to see a 10% potential upside and 14% total return in 2025.
• Equity Flows: A mix of net buying and net selling across sectors, with Financials and Telco & Tech showing positive flows.
• Short-Selling: High short interest in certain stocks, particularly Sea Ltd, indicates market uncertainty.
• Investor Behavior: Institutional investors are diversifying their equity allocations, favoring defensive sectors like Financials and SGX.

Conclusion

Singapore equities are in a strong position for 2025, with positive catalysts such as market reforms and defensive investor sentiment. The Financials sector and key stocks like SGX, UOB, Singtel, SCIL, and CAPN are expected to drive performance. However, the Consumer and Real Estate sectors remain challenging, with Real Estate facing restructuring and market cap issues. Investors should monitor US policy shifts and short-selling activity for further insights into market dynamics.