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SINGAPORE – Singapore stocks have held up better than regional peers amid volatile global markets, with analysts pointing to the Republic’s safe-haven appeal reinforced by tighter monetary policy and a stronger currency following the Iran war.
The Monetary Authority of Singapore on April 14 tightened its monetary policy stance for the first time since 2022, allowing for a stronger currency in the face of soaring oil and natural gas prices from the Iran war.
The shift would likely keep the Singapore dollar firm and support local stocks, reinforcing Singapore’s defensive appeal as investors seek out lower-risk markets.
Analysts noted that the local stock market is only down 0.5 per cent since the conflict started in late February, outperforming peers.
“We believe that tighter monetary policy settings should support continued firmness of the Singapore dollar and enhance Singapore’s status as a safe haven in Asia,” said Ms Jen-Ai Chua, equity research analyst for Asia at Julius Baer, a Swiss private bank.
A stronger Singapore dollar helps lift stocks by attracting foreign money and reinforcing Singapore’s safe-haven appeal. One Singapore dollar is now worth 0.79 US dollars.
Ms Chua believes investors have opportunities to reduce risk by focusing on high dividend stocks such as the three local banks and selected major Singapore-centric real estate investment trusts (Reits).
Share of DBS, OCBC and UOB have remained firm since the war started at the end of February, with DBS trading at around $57.55, OCBC at $22.85, and UOB at $37.61 at the time of writing.
They have outperformed regional peers and remain relatively defensive given their limited loan exposure to the Middle East and healthy capital positions, Ms Chua said.
As strong wealth management providers, the Singapore banks are also poised to benefit from capital inflows to lower risk regions and should enjoy a net interest income uplift from potentially higher interest rates, she added.
While Singapore Reits have fallen by more than 4 per cent as a sector since end February due to concerns over higher interest rates, they have outperformed regional Reits, which have fallen by as much as 10 per cent over the same period, Ms Chua said.
Selected Singapore-focused blue-chip Reits remain attractive as short-term borrowing costs stay low, with the three-month Singapore Overnight Rate Average holding steady at around 1.07 per cent.
This implies scope for more interest cost savings for the Reits as they should see lower finance costs upon refinancing, setting the stage for continued growth in distributable income, Ms Chua said.
A stable domestic property market and an economy oriented toward services and logistics continue to support asset values here despite geopolitical volatility, the analyst said.
She is positive on Singapore equities, citing continued safe-haven flows, healthy domestic fundamentals, and policy-led reforms to revive the stock market, such as the Equity Market Development Programme (EQDP) and initiatives make investing more attractive for shareholders.
OCBC’s equity research team, led by head Ms Carmen Lee, said the Singapore market’s defensive characteristics and attractive dividend yield, alongside the strength of the Singapore dollar, have gained greater appreciation in recent years.
Singapore stocks usually recover within a year when economic and liquidity conditions remain supportive, the analysts said, adding that this points to further upside for shares, including smaller companies, amid ongoing equity market reforms.
Among the positives cited include a new investment scheme that will be offered by Singapore’s Central Provident Fund in 2028 to provide simplified, low-cost, and diversified life-cycle investment products.
“Although the schemes have yet to be defined, we think they may support additional, long-term capital flows into Singapore equities, complementing the EQDP,” OCBC analysts said.
Their preferred small and mid cap stocks are: Boustead; CapitaLand India Trust; China Aviation Oil; Hong Leong Asia; Info-Tech Systems Integrators; Nordic Group; OUE Reit; Parkway Life Reit; and Stoneweg Europe Stapled Trust.
RHB analyst Vijay Natarajan noted the limited impact of the Middle East conflict on Singapore’s residential sector.
He sees sharp dips in developer stocks as buying opportunities due to the favourable demand-supply dynamics, with an expected resident population increase, low unsold inventory and interest rates.
Trading at deep discounts, developer stocks are also seen as beneficiaries of the EQDP and initiatives to unlock value and improve dividend payouts.
He has a buy call on City Developments and Coliwoo Holdings.
Macquarie Equity Research also believes Singapore is more resilient than others in the region.
Its top defensive plays are CapitaLand Integrated Commercial Trust and Parkway Life Reit.
It also highlighted Reits that could rebound if the Middle East conflict eases and interest rate risks subside, including CapitaLand Ascendas Reit, Mapletree Logistics Trust, Mapletree Pan Asia Commercial Trust and Frasers Logistics & Commercial Trust.
