Singapore stock market: A fruitful 2025, plenty of room for optimism in 2026

SINGAPORE – After several subdued years marked by thin liquidity and waning investor interest, 2025 will be remembered as the year Singapore’s stock market sprang to life and became one of the world’s best-performing stock markets. As at Dec 18, the Straits Times Index (STI) had risen almost 800 points in 2025, or about 21 per cent, a figure that would be much higher with dividends reinvested.

A confluence of global monetary easing, a strong defensive domestic reputation, decisive policy initiatives by regulators, a possible suspension of the tariffs threatened by the US administration and strong performances by heavyweight index constituents – mainly the local banks and Singtel – lifted sentiment, valuations and trading activity across the board.

Retail involvement is rising

While the Singapore Exchange (SGX) has not yet released a single consolidated statistic quantifying the exact increase in retail participation for the whole of 2025, multiple official disclosures, market reports and media coverage point clearly to a meaningful revival in retail investor activity during the year.

For instance, SGX chief executive Loh Boon Chye told shareholders at the exchange’s annual general meeting in October that retail participation had reached a three-year high, adding that retail investment in recent initial public offerings has “trended above the market average”.

Furthermore, retail-driven turnover in Singapore-listed exchange-traded funds rose by about 67 per cent year on year in the first half of 2025, suggesting growing engagement from individual investors seeking diversified exposure.

In trading platform Moomoo’s 2H2025 Retail Investor Sentiment Survey, more than seven in 10 investors said they considered Singapore stocks an integral part of their portfolios, adding that they intended to either maintain or increase their exposure in the coming months.

Taken together, these indicators show that retail investors played an increasingly important role in Singapore’s equity market in 2025. Their participation helped lift market liquidity, supported trading volumes during periods of volatility and contributed to renewed interest in domestic equities amid regulatory initiatives such as the $5 billion Equity Market Development Programme (EQDP).

In early April, the STI came close to crossing 4,000, only to be hit by a wave of selling triggered by the US government’s announcement of sweeping tariffs that stoked fears of a global slowdown.

The US has backed off on many of those tariffs while the US Supreme Court contemplates their legality, and the subsequent rebound on Wall Street has helped boost sentiment here.

On July 2, the STI closed above 4,000 for the first time ever at 4,010.77. Just four months later on Nov 11, it closed above 4,500 at 4,542.20.  Since then, it has repeatedly notched new all-time highs, the most recent being 4,589.17 on Dec 15, firmly re-establishing Singapore as one of Asia’s best-performing developed markets. 

While not all sectors shared equally in the rally, the overall narrative was clear: Confidence has returned.

The global backdrop: US interest rate cuts change the mood

A key external catalyst came from the United States. After more than two years of aggressive tightening, the US Federal Reserve began cutting interest rates in 2025, confirming what markets had long hoped for – that inflation was under control. The pivot marked a turning point not just for Wall Street but also for global capital markets.

Lower US rates eased pressure on emerging and developed markets alike, reduced the appeal of cash and fixed income, and encouraged investors to re-engage with equities. For Singapore, whose market had struggled to attract flows amid high global interest rates, the effect was particularly pronounced.

The domestic push: EQDP and bank stocks

While global conditions set the stage, domestic policy action provided the spark. The Monetary Authority of Singapore (MAS) and SGX jointly unveiled the EQDP, a broad, multi-pronged effort to revive the local equities ecosystem.

It addressed longstanding concerns head-on: weak liquidity, insufficient research coverage for small- and mid-cap stocks, and a lack of compelling growth listings. 

Measures included funding support for independent research coverage, reforms to listing and post-listing requirements, initiatives aimed at strengthening market confidence and transparency, more than $2 billion allocated to fund managers so far to invest in non-STI constituents and a new SGX-Nasdaq bridge that will become operational in 2026.

Nowhere was the renewed confidence more visible than in the banking sector. Singapore’s three local banks – DBS Bank, OCBC Bank and UOB – climbed to new all-time highs during the year, although in UOB’s case, momentum was lost after it reported a significant third-quarter drop in profit because of generous provisions for potential loan losses in China and the US.

Strong earnings, resilient asset quality and generous capital returns underpinned the rally. While net interest margins moderated slightly as rate cuts began, investors took comfort in the banks’ diversified income streams, robust balance sheets and disciplined risk management.

Among individual blue chips, Singtel stood out for its steady and disciplined recovery. Long criticised for sluggish growth and complex overseas operations, the telecommunications company benefited from strategic refocusing, asset recycling and improving contributions from regional associates.

A wish list for 2026 

Given a broadly positive backdrop heading into 2026, here are the wishes of the Securities Investors Association (Singapore), or SIAS, for next year:

The SGX-Nasdaq bridge fulfils its promise

Much of the EQDP so far has focused on improving demand and attracting liquidity. However, what is equally important is supply, and here, SGX’s move to establish a bridge with Nasdaq is a brilliant one as it will surely enhance SGX’s attractiveness as a listing destination. 

Still, it must be said that the link is only an enabler, a great first step whose success will depend on several reinforcing factors across regulation, market structure, investors and issuers.

The link will need straightforward dual-listing or secondary-listing routes, with minimal regulatory friction and no ambiguity over which rules apply in which market. Clear guidance on accounting standards, disclosure expectations, ongoing obligations and enforcement is essential, as are predictable timelines for approval.

SGX must demonstrate that growth and tech companies can achieve fair, competitive valuations, supported by meaningful liquidity. In this connection, anchor investors play a critical role in setting valuation benchmarks and signalling confidence.

SIAS hopes the pipeline of good-quality start-ups and established companies which eventually tap this bridge will remain strong and lasting.

Research of small- to mid-caps shows lasting improvement

It has to be said that previous attempts to kick-start research coverage of second-line companies have not been successful. To ensure success this time round, it would be essential to learn from lessons of the past.

The first initiative came in 2003 when broking firms were given $60,000 each under the SGX-MAS Research Incentive Scheme to provide regular reports for at least 15 stocks which would then be published on SGX’s website and made available free to the public.

Participating companies had to pay just $4,000 a year to enjoy coverage, while research houses had to produce at least four reports a year.

After a promising start, the cost to each company by 2008 had risen from $4,000 to $13,000, which presumably was too high for many to stomach – especially when there was a chance that reports might call a “sell’’ on their shares.

This scheme was eventually replaced in 2009 by the SGX Equity Research Insights (SERI), with only one provider: Standard & Poor’s, which issued reports with no recommendation.

Perhaps precisely because readers did not receive a “buy’’ or “sell’’ recommendation, SERI proved unpopular and folded in 2013.

In 2021, MAS launched Grant for Equity Market Singapore (GEMS), which included a research development grant that paid $4,000 for each report, up to 39 reports under the basic tier, and then $5,000 a report for the 40th to 80th reports under the enhanced tier. 

Under the EQDP, a further $50 million will be allocated to GEMS and the scheme has been extended to Dec 31, 2028.

It is not known how many companies have tapped GEMS or how many reports have been issued under the scheme, but two key lessons can be drawn from the past to ensure it remains viable – funding has to eventually become self-sustaining, and reports should ideally come with investment recommendations. 

SIAS hopes that this will be the case and that retail investors will have access to high-quality reports on smaller companies on a regular basis.

There are, of course, a multitude of other wishes. 

On the external front, these would include hopes that the macro environment stays benign, inflation does not spike and that artificial intelligence delivers on its promise. Domestically, SIAS hopes details of how the authorities are going to enable investor recourse or civil action for losses through fraud or other irregularities will be announced and that companies continue to raise their governance standards.

As we head into 2026, SIAS believes there is plenty of room for optimism and wishes all readers a fruitful year.