Maybank trims 2026 STI target to 5,500, says weak IPO debuts could dampen market
Still, its head of research asserts that the core rerating thesis for Singapore stocks is intact
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[SINGAPORE] Maybank has marginally lowered its 2026 year-end target for the Straits Times Index (STI) to 5,500 points, down from about 5,600 previously.
This adjustment is in direct response to consensus downgrades in earnings per share estimates – lowered by 2 per cent due to a higher energy cost environment exacerbated by the US-Iran war, it said in a Tuesday (Jun 30) report.
Nevertheless, Thilan Wickramasinghe, head of research at Maybank Securities, believes that there is still room for the market to rerate.
However, he warned that poor initial public offering debuts in the past year could negatively affect future listings and, in turn, the broader market.
The “IPO contamination” threat
Wickramasinghe said that rerating in the market this year will be driven by broader market liquidity, accelerating corporate artificial intelligence adoption and the allocation of about S$4 billion in the Equity Market Development Programme (EQDP).
However, poor post-listing performance has plagued the market, he observed.
About 60 per cent of IPOs launched on the Singapore Exchange over the past year are currently trading below their opening prices, noted the brokerage.
This sustained aftermarket weakness creates a “contamination risk” for future listings. While there is market optimism surrounding an expanding pipeline of 30 slated new listings, the current environment may force potential IPO candidates to either delay market debuts or shift listings to competing regional venues.
Maybank stated that, if unaddressed, this contamination effect threatens to stifle secondary-market velocity by limiting the diversity of listed companies. It added that if high-growth sectors fail to list domestically, it could permanently depress the intrinsic valuation multiples of the Singapore market compared with global peers.
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Sectors to watch
Looking into the second half of 2026, Maybank was most positive on sectors where strong earnings visibility aligns with core macroeconomic and reform catalysts.
This includes technology manufacturing, which the bank said offers direct exposure to global AI-driven capital expenditures and productivity gains.
Industrials, meanwhile, are supported by resilient domestic demand from defence spending, urban solutions and a multi-year construction boom.
At the same time, non-bank financials are positioned to benefit from higher market velocity, safe-haven liquidity flows and the eventual deployment of EQDP funds.
Bank, Internet and plantation stocks are also set to provide a mix of stability, value-unlocking potential and steady growth, said Maybank.
It also noted that the earnings mix for Singapore’s banking sector is also undergoing a transition. Net interest income (NII) is no longer doing the heavy lifting to define bank stocks’ valuations, as lower benchmark rates have led to average NII declining by about 5 per cent year on year.
However, this contraction is being offset by accelerating non-interest income, which rose about 7 per cent year on year. This momentum is being fuelled by strong wealth management flows, robust capital markets activities and rising regional trade, with wealth fees surging significantly for major players.
Asset quality across the sector also remains highly benign, with non-performing loans averaging just 1.1 per cent. While provision write-backs may be limited due to heightened geopolitical uncertainty, the banks continue to hold strong capital buffers.
This positions them well to sustain their dividend payout trajectories, with Maybank highlighting OCBC and DBS as top picks due to their strong cross-platform synergies and clear visibility on capital returns.
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