Finding value beyond the Big Three banks as STI hits record highs
Certain sectors such as property developers and financials stand out as prime beneficiaries
SINGAPORE’s equity market has been on a record-breaking run this year, powered by sectors such as industrials, financials and utilities. The Straits Times Index (STI) has climbed 12.7 per cent year to date (YTD) with an all-time intra-day high of 4,282 on Aug 14, as global investors rotated into defensive, yield-generating assets amid heightened uncertainty.
With robust dividend yields, geopolitical stability, and targeted policy support from the Monetary Authority of Singapore (MAS), the local market remains a compelling destination for long-term investors.
Singapore’s outlook
Defensive companies like ST Engineering, DFI Retail and Jardine Matheson have led the charge, while heavyweight banks provided steady support.
At a macro level, Singapore’s trade competitiveness remains intact despite global tariff uncertainties. The city-state enjoys the lowest baseline US tariff rate in Asean at just 10 per cent, helping it attract rerouted trade and investment flows as companies seek tariff-friendly jurisdictions.
At the same time, targeted initiatives like the S$5 billion Equity Market Development Programme (EQDP) and enhanced Gems (Grant for Equity Market Singapore) research grants are improving market liquidity and broadening participation, particularly for overlooked small- and mid-cap stocks.
Financials: Beyond the Big Three
Singapore’s financial sector remains a cornerstone of its economy, anchored by world-class banks and a robust regulatory framework. The heavy weighting of DBS, OCBC, and UOB in the STI means the banks continue to dominate investor attention. Amid moderating net interest margins as global rates decline, they still offer yields exceeding 5.6 per cent by FY2027, providing defensive income appeal.
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Yet, the EQDP could shift the spotlight towards small- and mid-cap financials, long overshadowed by the big three banks. For instance:
- Singapore Exchance stands to benefit indirectly from higher trading volumes, new listings, and clearing activity driven by broader equity participation.
- UOB Kay Hian, a regional brokerage, is well positioned to capture EQDP-driven trading flows. Its strong track record, undemanding valuation, and clear earnings growth outlook make it a prime beneficiary among mid-cap financials.
Property developers
Among the biggest beneficiaries of EQDP are Singapore’s property developers, a sector long trading at steep discounts to net asset value (NAV). The iEdge SG Real Estate Developers & Operators Index has surged 40 per cent YTD, reflecting renewed investor attention catalysed by MAS initiatives.
Despite the rally, valuations remain compelling. Many developers continue to trade at significant discounts to their NAV, suggesting room for further re-rating as liquidity improves.
Here are some mid-cap gems:
- Ho Bee Land, best known for Sentosa Cove and The Metropolis at one-north, has returned to profitability with a net profit of S$110 million in FY2024. Yet, it trades at just 0.40 times price to NAV – well below long-term averages.
- Singapore Land Group boasts quality commercial assets like Singapore Land Tower and Marina Square. Despite 11 per cent profit growth in FY2024, the stock trades at 0.55x P/Nav. Redevelopment projects such as Clifford Centre could unlock additional NAV upside.
Large caps also offer opportunities:
- City Developments, with global operations spanning residential and commercial projects, trades at 0.69x P/Nav – well below historical levels. Management’s steady dividend payout policy adds to its investment appeal.
- UOL, owner of Pan Pacific Hotels and major stakes in SingLand, trades at 0.55x P/Nav, also below historical averages. Ongoing residential launches and redevelopment projects position it for earnings growth.
S-Reits: stability and secular growth
Singapore real estate investment trusts (S-Reits) continue to demonstrate resilience, despite macro headwinds. S-Reits currently trade at an average price to book (P/B) ratio of 0.9x, below the historical average of 1.0x, suggesting undervaluation even as fundamentals remain strong. Within this sector, some small-caps may also benefit on the back of MAS’ EQDP and Gems schemes.
IReit Global offers 26.9 per cent forecasted distribution per unit (DPU) growth over the next three to five years and trades at a steep discount (P/B of 0.48x, yield of 5.36 per cent). Its Berlin Campus repositioning and improving profitability support long-term value creation.
CDL Hospitality Trust is well-poised to benefit from Singapore’s vibrant tourism pipeline and infrastructure upgrades. It offers 20.7 per cent forecasted DPU growth over the next three to five years, trades at 0.56x P/B, and provides a high forward yield of 5.79 per cent.
Semiconductors ride the AI and 5G waves
Singapore contributes 5 per cent of global wafer fabrication capacity and 10 per cent of semiconductor output, making it a key node in the global supply chain. The recently launched National Semiconductor Translation and Innovation Centre for Gallium Nitride underscores its ambitions to move up the value chain. Industry tailwinds are already evident in the latest corporate results:
- UMS Integration posted revenue growth of 20 per cent YoY for Q2 2025 as more parts are being qualified, leading to more new customers. They have also secured a new product order from Applied Materials, which is slated to start production in Q4 2025.
- Frencken Group saw semiconductor revenue surge 38 per cent YoY in H1 2025, attributed mainly to stable sales growth to a key customer in Europe and a rebound in sales by the Asia operations.
With artificial intelligence, electric vehicles, and 6G adoption set to drive global chip demand, Singapore’s semiconductor ecosystem is well-positioned to capture growth.
Risks to watch
While structural drivers are positive, investors should remain mindful of risks. Singapore’s GDP growth is expected to moderate in H2 2025, with export weakness a key drag. Interest rate sensitivity remains another consideration. Lower interest rates could pressure banks’ earnings while providing relief to leveraged sectors such as Reits.
Nonetheless, attractive valuations and strong dividend yields provide a cushion, maintaining the Singapore’s market appeal for both income and long-term growth investors.
Overall, Singapore’s market outlook is defined by a blend of resilience, structural tailwinds, and undervaluation. These factors underpin our bullish view; we have a target level of 4,924 for the STI, which is a potential upside of 15 per cent by end-2027.
Within this outlook, certain sectors stand out as prime beneficiaries. Property developers are set for re-ratings under EQDP; financials are diversifying beyond the three big banks; S-Reits continue to offer stability and yield, and semiconductor firms are riding global tech momentum.
The writer is a research analyst with the research and portfolio management team of FSMOne.com, a Singapore subsidiary of iFast Corporation
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