Singapore stock benchmark headed for record high as banks rally

Singapore - Singapore stocks are headed for a record high as renewed optimism around the city-state’s banks gives a lift to the wider market.

The benchmark Straits Times Index (STI) was as much as 1 per cent higher on Dec 5, putting it on track to surpass the previous record closing price set in October 2007.

DBS Group Holdings was among the biggest advancers in the index, rising as much as 2.4 per cent in morning trading.

The recent rally has been driven by a rise in Singapore banking stocks, with analysts highlighting the ability of lenders to maintain profitability despite expectations of lower interest rates.

Banks’ stable dividend payouts are also enticing investors. 

The STI has surged 18.4 per cent so far in 2024, making it the best-performing stock market in South-east Asia.

Although banks’ net interest margins are narrowing, the pace “remains gradual, which along with steady loan growth and deposit cost management, helped to mitigate some of the interest rate headwinds”, said IG Asia market strategist Jun Rong Yeap. 

The Monetary Authority of Singapore (MAS) kept its Singapore dollar policy unchanged in October, its last decision for 2024. But expectations are growing that the central bank will eventually join a global wave of easing.

The bulk of the optimism may lie in the ability of Singapore’s giant banks to generate non-interest income, according to Mr Yeap.

“The momentum in wealth management activities continues to support overall performance, as the banks continue to enjoy strong inflows from the region,” he said.

The Singapore Government’s push to boost liquidity in the stock market has also helped sentiment.

A newly formed task force will submit an action plan by August 2025, and will consider “initiatives to improve the vibrancy” of the stock market, and study ways “to galvanise greater private sector participation” in the effort, MAS said in August.

Morgan Stanley analysts recently predicted that 2025 will be a “fruitful” year for Singapore stocks, in part because of the push for market reforms.

Goldman Sachs Group is similarly upbeat on the market, upgrading it in November on the view that earnings growth in key sectors will offset concerns the economy is slowing. BLOOMBERG