For an equities market that does not usually hog the global spotlight, Behind Singapore’s Stock Boom: Skill, Luck, or Both? the Straits Times Index (STI) is enjoying an unusually strong run.
The index is up about 35 percent over the last 12 months, a figure that is all the more impressive given the S&P 500 has increased roughly 18 percent over the same period, Behind Singapore’s Stock Boom: Skill, Luck, or Both?
With trade tensions, energy costs and war in the Middle East periodically unsettling markets across the globe, Singapore’s equity market has held strong.
Media outlets have mostly bought into the narrative that Singapore’s equities market is structurally secure in an increasingly unstable world. Investing.com described a “Goldilocks” economy, and the South China Morning Post called Singapore a “stable investment oasis amid global storms”.
Then just last week, reality started rolling in.
The STI fell 1 percent as the yield on the 30-year US Treasury rose above 5.2 percent, its highest level since 2007. Brent crude also pushed past $90 a barrel. American markets took a hit, and Singapore fell with them.
Just days earlier, a Wall Street technology sell-off had already spilled into Asia and nudged the index lower.
A 1 percent decline after several years of substantial gains is not a cause for alarm by itself, and compared with other equities markets, Singapore still looks resilient.
The drop does, however, carry one lesson investors should note: the fact that Singapore is attracting capital does not mean it is insulated from dangers in global markets.
The point is sharper at the company level.
SATS, the Singapore aviation services group, reported first-quarter results in August showing revenue up 11.3 percent but earnings increasing by just 6 percent. SATS attributed the gap to developments in the Middle East that disrupted cargo trade flows and flight activity.
The same instability that has been driving capital towards Singapore is simultaneously eroding the margins of Singaporean companies operating abroad.
Manufacturing a Market
Not all media outlets have been bullish about the Singapore Exchange (SGX). The Economist has noted that where other Asian markets have imposed tougher listing standards, Singapore has offered incentives instead. Local giants such as Sea Group and DayOne have turned to the United States to raise capital instead of Singapore.
That scepticism is the result of Singapore’s deliberate strategy to boost trading liquidity by focusing on improving convenience rather than enforcing obligations.
In February 2025, the government announced a package of measures intended to revive the equities market. These included a 20 percent tax rebate for primary listings, a narrowing of the qualifying investment categories for new family office applicants towards Singapore-listed equities, and a S$5 billion Equity Market Development Programme (EQDP), which invests state funds in strategies run by Singapore-based fund managers, with a mandate to look beyond index component stocks.
The measures did not stop there. A review group convened by the Monetary Authority of Singapore (MAS) recommended grants to strengthen market makers focused on small and mid-cap stocks outside the STI, and a streamlined dual-listing bridge between SGX and Nasdaq. Listing reviews were consolidated under SGX RegCo with approval timelines shortened to six to eight weeks, while admission criteria shifted towards a disclosure-based regime.
At Budget 2026 in February, the EQDP was expanded from S$5 billion to S$6.5 billion, with S$3.95 billion already allocated across nine asset managers at the time of announcement.
Taken together, these changes form a public programme of regulatory relief and rebates aimed at improving the liquidity of Singapore’s market.
It is a callback to Singapore’s identity as a global economic hub. As one partner at KPMG, a professional services firm, told CNBC, investors like Singapore for its location, English common law and large private capital markets. The package to boost the equities market sweetens this deal.
Weaknesses of the Market
While Singapore’s strategy can be defended as a deliberate and disciplined framework, it would be a leap in logic to say the country has insulated itself from global uncertainty.
It needs to be recognised that Singapore’s recent fortune was built partly on the misfortune of the Gulf states.
The UAE, Qatar and Bahrain had, like Singapore, spent years developing a stable image. The Iran war has instead left these countries working to protect their reputations and stem capital outflows.
Singapore has benefited from the redirection of foreign capital. In many ways, the efforts of Singapore’s government to encourage this represent astute economic statesmanship, making the most of a bad situation.
The fickleness of investors should nonetheless remind Singapore that regional instability could create a similar crisis of confidence closer to home, something the country has not yet been tested by.
Another key concern is the composition of the STI itself. The record high conceals a market in which very few companies are doing the work.
Singapore’s three leading banks, DBS, OCBC and UOB, now account for close to 60 percent of the STI by market capitalisation. A fourth company, Singapore Exchange Limited, is the listed operator of the exchange itself. Together, these four stocks have produced roughly 95 percent of the index’s gains this year, according to DBS Group Research. An index of thirty is being carried by four.
An investor buying the STI for exposure to Singapore’s economy is therefore, in practice, buying into three large banks competing in the same space.
While all three reported results in the same week, UOB’s net interest margin, the gap between what a bank earns on its loans and what it pays for deposits, fell below its own guidance, and its shares dropped almost 5 percent.
The index itself is not cheap either. It now trades at more than 16 times forward earnings, its highest valuation since the global financial crisis.
Analysts disagree on what that means. JPMorgan, an investment bank, has raised its bull-case target for the STI, pointing to strong growth, a firmer Singapore dollar and expected inflows from the EQDP.
However, Fidelity International, a global asset manager, has decided to reduce its exposure to Singapore, arguing share prices are overvalued compared with earnings.
Keep Calm and Carry Capital
There is a common saying that one cannot change a bad outcome, only one’s response to it. Singapore, characteristically, tries to keep its responses level and quiet, with a continued smile.
That approach has served the market well this year, and the results are worth taking seriously.
But a rally sustained in part by government initiatives, concentrated in one industry, and boosted by the misfortunes of rival financial centres is not yet proof of anything durable.
Singapore can be proud, but not haughty in the coming months.
