Singapore’s equity market gains raise bar for new IPOs: OCBC

[SINGAPORE] Singapore’s initial public offering (IPO) market could face a higher bar, with the S$6.5 billion Equity Market Development Programme (EQDP) lifting valuations of existing Singapore-listed stocks, making it more challenging for new listings to stand out, OCBC said.

New IPOs now need to offer either a meaningful valuation discount or a compelling growth story to attract investor capital, said Carmen Lee, head of equity research at OCBC, even as many listed stocks on the Singapore Exchange (SGX) are performing well while remaining attractively valued.

She added: “Most companies, when they come to the market, want to price exactly the same as the market, and that’s where the challenge is because unless you can deliver 20 per cent earnings growth or something (similar), it is very hard to justify that valuation.”

Lee was speaking at a media briefing on the bank’s outlook on Singapore equities on Monday (Jul 6).

The bank’s report noted that since the EQDP was implemented in February 2025, the capital market has strengthened, prompting a re-rating of local equities.

Lee said the rerating has created more opportunities for investors in the secondary market, reducing the appeal of new IPOs.

Even so, she expects the second half of this year to bring a broader pipeline of IPOs, including those by companies from “more interesting” sectors.

“With that, a wider set of IPOs will come to the market, and we hope valuations are attractive enough, which should achieve a more successful IPO experience for investors.”

She added that greater diversification would benefit the market. Efforts are under way to attract more overseas listings, which would broaden Singapore’s IPO landscape beyond its traditional base of domestic companies.

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Lee’s comments come as a healthy IPO pipeline has yet to translate into stronger post-listing performance. Several companies that debuted in the first half of the year, including JustCo, have delivered lacklustre share price returns.

Overweight on Singapore equities

Despite geopolitical tensions and renewed inflation concerns, the bank remains overweight on Singapore equities for the second half of 2026, citing attractive valuations that remain undemanding despite recent gains.

OCBC also expects Singapore equities to continue standing out for their defensive characteristics and the strength of the Singapore dollar amid ongoing macroeconomic uncertainties.

It noted that continued heavy investment in artificial intelligence-related infrastructure will keep the sector a key long-term structural driver, shaping capital allocation over the coming years.

The bank also remains positive on industrial stocks, noting that many companies in the sector are well positioned to benefit from long-term secular growth trends. It added that positive developments emerging from the Middle East are also supportive of the sector.

Ada Lim, equity research analyst at OCBC, said: “Potentially for discerning investors, there can be a lot of stock-pitching opportunities in the industrial sector itself, so we’ll continue to advocate for investors to stay selective and also stick to quality companies.”

She noted that the industrial stocks make up the third-largest sector in the Singapore market, offering exposure to a wide range of underlying industries and dynamics.

OCBC’s research team noted that Singapore real estate investment trusts (Reits) have persistently underperformed since the start of the year.

Returns diverged further after the start of the Middle East conflict, caused by concerns over inflationary pressures and significant changes in market expectations over the US Federal Reserve’s policy rate trajectory.

Andy Wong, senior equity research analyst at OCBC, said investors should remain selective, focusing on those “that have the ability to deliver sustainable and robust DPU (distribution per unit) growth”.

Stock picks

Holding a constructive outlook for the second half of 2026, OCBC identified 15 preferred Singapore picks:

• Bumitama Agri
• CapitaLand Ascendas Reit
• CapitaLand India Trust
• CapitaLand Investment Trust
• CapitaLand Integrated Commercial Trust
• Hong Leong Asia
• Keppel DC Reit
• Keppel
• Netlink NBN Trust
• Q&M Dental Group
• Sembcorp Industries
• SIA Engineering
• ST Engineering
• Singtel
• UOL Group

These stocks have a potential upside ranging from 12.7 to 52.2 per cent.

Lee said the picks were designed to capture a wide range and diverse mix of sectors. The banks, with their strong share price performance, were largely left out; the allocation spans real estate, consumer, healthcare and household-related stocks.

Lee added: “Healthcare will continue to feature quite predominantly (and) importantly in our stock (picks) as well, because I believe it is one of the key structural themes.”

Beyond AI, she noted that biotechnology is likely to become an increasingly important area of growth.

OCBC is among the joint book runners and underwriters of Foundation Healthcare’s upcoming IPO, which is set to make its trading debut on Wednesday.