US dollar slide sharpens case for Singapore stocks, says OCBC equities research head

[SINGAPORE] Foreign investors seeking to diversify away from US dollar-denominated assets may find Singapore equities increasingly attractive, said Carmen Lee, head of equity research at OCBC Group Research.

Such diversification flows could, in turn, help lift trading volumes on the Singapore Exchange (SGX) in 2026, she added.

“I’m counting on it, because the government put in so much effort in promoting (the equities market),” Lee said, pointing to initiatives such as the S$5 billion Equity Market Development Programme.

She was speaking to The Business Times on Tuesday (Jan 6) on the sidelines of the lender’s annual Premier Private Client Investment Seminar at Ritz-Carlton, Millenia Singapore.

Foreign investors are likely to find Singapore dollar-denominated assets “very attractive” amid the Singdollar’s relative strength against the greenback, Lee said.

Over the past year, the US dollar has depreciated 6.7 per cent against the Singdollar, as at 5 pm on Tuesday.

That decline has weighed on returns for Singdollar-based investors holding US dollar assets, once those investments are converted back into the Republic’s currency.

Conversely, investors whose home currencies have weakened against the Singdollar could see stronger returns from Singdollar-denominated assets when converting gains back into their home currency.

This currency dynamic, coupled with the strong performance of the benchmark Straits Times Index (STI) in 2025, strengthens the case for Singapore equities, said Lee.

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The index delivered a total return of 22.7 per cent last year, outperforming the global benchmark S&P 500.

For foreign investors, equities remain one of the few Singapore asset classes that still make sense, she said.

“It doesn’t make sense for a foreign investor coming to Singapore to buy property anymore. You’re not going to put (your money) in a savings account – (it is) such a bad return for your investment. You can’t buy bonds, because bond yields are also not that attractive now,” she added.

Within equities, Lee said real estate investment trusts stand out, offering “good dividend yields” with a cushion of at least 5 to 6 per cent, and are positioned to benefit from expected interest rate cuts in 2026.

Passive exposure via the STI could also be attractive. Lee expects the benchmark to cross the 5,000-point mark in 2026, broadly in line with other analysts’ projections. On Tuesday, the index closed at a record high of 4,739.97.

Additionally, industrial and infrastructure-linked names such as Singtel and ST Engineering were cited as “fairly defensive” plays, supported by ongoing share buybacks that could boost share price performance.

Lee also pointed to opportunities among small- and mid-cap stocks with market capitalisation of S$100 million to S$1 billion.

Nine of the 10 SGX-listed stocks that posted the highest total returns in 2025 fell within this market-cap range, based on Bloomberg data.