Local shares rode on the improving economy to record their highest first-half returns in four years - and there is still more to come, say analysts.

The Straits Times Index (STI) generated an 11.9 per cent total return in the six months to June 30, the best result since the 13.8 per cent yield in the first half of 2017, said the Singapore Exchange (SGX).

But investors should not fret that they have missed the boat; analysts say there is still time to start picking up stocks to enjoy potential returns.

Mr Adrian Loh, head of research at brokerage UOB Kay Hian, is among those who believe the STI could rise further in this half of the year. He noted that while the index is among the cheapest in the region at current levels, it has one of the highest yields with further potential upside.

Maybank Kim Eng economist Chua Hak Bin expects the Ministry of Trade and Industry to revise its 2021 gross domestic product growth forecast to between 6 per cent and 7 per cent from its 4 per cent to 6 per cent now.

Dr Chua noted that 75 per cent of Singapore's population are likely to be fully inoculated by the fourth quarter of this year, and that more investments in new electronics manufacturing capacity are likely, while the construction sector could recover significantly as foreign worker shortages ease.

Standard Chartered Bank's economists Edward Lee and Jonathan Koh expect the economy to grow by 7 per cent this year. They said that targeted fiscal support from the Government and low interest rates should counter inflation pressures and keep the economy in recovery mode.

The Ministry of Manpower said last week that it was "encouraged" to see the resident unemployment rate come down from 4.8 per cent last September to 4.1 per cent in February.

About 270,000 local residents were hired by 42,000 businesses between August last year and February this year with support from the Jobs Growth Incentive. Almost all of these businesses were small and medium-sized enterprises.

Fitch Solutions forecasts that real household spending could expand by 5.9 per cent this year, compared with a contraction of 13.8 per cent last year, as more restrictions are lifted and consumers loosen their purse strings further.

There are risks, however. DBS Bank economist Irvin Seah warned that shortages of semiconductor chips, a manpower crunch in construction and a drag on tourism in this half of the year could taper the pace of growth in the months ahead.

He predicts that the economy will grow at a more modest pace of 6.3 per cent this year.

Analysts maintain that there is still value to be found in the Singapore stock market.

Mr Loh and Maybank Kim Eng analyst Kareen Chan said the SGX has potential to benefit from more listings and other product offerings this year.

Ms Tay Hwee Ling from Deloitte Southeast Asia and Singapore said there is a pipeline of companies waiting for a "favourable time" to stage an initial public offering, adding that City Developments' potential real estate investment trust (Reit) listing during the third quarter should boost market momentum.

"With the emergence of more new economy businesses, we can expect to see companies in consumer businesses, including those in food and beverage and the services industries, needing to raise funds," she added.

She said that "with upcoming Spac (special purpose acquisition company) regulations expected to be issued by the SGX, companies and investors can look to such alternative listing options to tap the market".

Mr Loh sees more room for growth at banks such as OCBC as he reckons the stock is less expensive compared with DBS and UOB.

Ms Chan, meanwhile, said that a pickup in deal flows in the regional technology, media and telecommunications sector should bode well for DBS.

DBS shares were heavily traded between July 1 and 8, with an average daily trading turnover of $144 million, compared with $136 million in the first six months of the year, according to the SGX.

DBS, UOB and OCBC averaged a 19 per cent total return during the first half, in line with the median 19.8 per cent return for the 200 largest listed global banks by market value.

Technology stocks could make interesting investments too, as these "are largely immune to Covid-19", Mr Loh said.

Tech stocks like Frencken Group, UMS Holdings, NanoFilm Technologies, AEM Holdings and Venture Corp were hotly traded in the first half and averaged total returns of 25 per cent.

Other Singapore-listed stocks in the sector include CSE Global, Grand Venture Technology and Aztech Technologies.

As Singapore eases social distancing restrictions, the reopening of sectors such as retail and food and beverage is expected to boost Reits such as Frasers Centrepoint Trust, which has nine heartland malls; Mapletree Commercial Trust, with malls like VivoCity; and Lendlease Global Commercial Reit, which owns 313@Somerset.

Analyst Lim Siew Khee from CGS-CIMB and Mr Loh agree that industrial Reits such as Ascendas and Frasers Logistics and Commercial Trust could be worth watching as these "have seen resiliency in their businesses".

Other stocks that could benefit from the economic reopening are ComfortDelGro, Genting Singapore, Sats and foodcourt operator Koufu, although DBS Vickers warned that it could be a while yet before leisure travel to Singapore is fully permitted once more.

Meanwhile, companies such as Yangzijiang Shipbuilding with most of their earnings from China, where Covid-19 has been more contained, could make good investments, Mr Loh said.

Yangzijiang was the strongest of the STI constituents in the first half in terms of combined net institutional and net proprietary inflows, noted the SGX.