After a stellar 2024 that saw the Singapore market soar by 16.9%, hitting a 17-year high, 2025 promises to be a year of uncertainty and opportunity as global economic and policy shifts reshape investor sentiment. While the market last year delivered robust gains led by financial stocks, the road ahead looks more complex amid unpredictable U.S. policies under the Trump administration.
2024: A Year of Gains with Diverging Performances
The standout performer of 2024 was Singapore’s financial sector, which surged by 34%, buoyed by DBS Group Holdings’ 44% rise. Transport-related stocks also thrived, with Yangzijiang Shipbuilding and Sats benefiting from unexpectedly aggressive interest rate cuts. However, REITs lagged, declining by 11.8%, weighed down by exposure to Chinese properties.
Paul Chew, head of research at PhillipCapital, noted that despite the recent rally, long-term returns over 17 years have averaged 4.5% per annum, including dividends. “The market has essentially treaded water since its all-time high in 2007,” he remarked.
Key Themes for 2025
PhillipCapital has identified three dominant investment themes for the year:
Rate Cuts Beyond Expectations
Chew predicts four U.S. Federal Reserve rate cuts in 2025, double the two currently guided. Lower rates are expected to bolster REITs, as declining financing costs alleviate pressure on dividend payout growth.
Corporate Restructuring
Major corporations are restructuring to unlock value:
Keppel is expected to monetize its rig assets.
Thai Beverage (ThaiBev) may sell its stake in BeerCo through an IPO or trade sale.
Singapore Telecommunications (Singtel) is poised to crystalize value in its stakes in Bharti and Intouch.
Singapore Post (SingPost) is focusing on divesting Australian and property assets.
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Re-rating of China Risk Premiums
Chew anticipates that China could see a valuation re-rating as recent U.S. tariff proposals target Canada and Mexico more aggressively than China.
Sector Insights: Winners and Neutral Plays
Financials: Overweight
Banks are well-positioned to benefit from rate cuts and improving loan growth. Non-interest income, particularly from wealth management, is expected to drive growth. Analyst Glenn Thum favors OCBC and UOB, citing attractive valuations and strong dividend yields:
OCBC: Target price $18.80, dividend yield 5.4%.
UOB: Target price $39.70, supported by fee income growth and improving loan margins.
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REITs: Overweight
Lower rate expectations make REITs a compelling play. Analysts Darren Chan and Liu Miaomiao foresee higher dividend yields and distribution per unit (DPU) growth as borrowing costs decline. Retail REITs stand out as international visitor arrivals boost tenant sales and rental reversions.
Preferred picks include:
CapitaLand Ascott Trust (CLAS): Target price $1.04.
Frasers Centrepoint Trust (FCT): Target price $2.44, offering stability with suburban malls.
Stoneweg European REIT: Target price EUR1.95, benefiting from strategic divestments.
Singapore REITs 2025 Outlook: Positive Sector View with Top Picks and Growth Drivers
Construction: Overweight
A robust pipeline of public housing projects, along with expansions at Changi Airport Terminal 5 and integrated resorts, positions the construction sector for growth. Analyst Yik Ban Chong highlights Wee Hur and Centurion Corporation as top picks, leveraging new dormitory projects to drive revenue.
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Telcos: Consolidation Opportunities
Chew is “overweight” on telecommunications, with potential sector consolidation driven by upcoming 700MHz spectrum payments. Singtel is favored for its data center projects and asset monetization efforts, with a target price of $3.44. However, StarHub faces challenges in the competitive mobile market, leading to a cautious outlook.
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Challenges and Strategic Entry Points
While market uncertainties loom, opportunities abound. REITs, financials, and construction-related stocks are positioned to thrive amid rate cuts and structural reforms. Analysts also advise investors to watch the summer of 2025, when modest market corrections could provide attractive entry points.
Paul Chew sums up the outlook, saying, “Investors must navigate a challenging environment in 2025, but opportunities are plentiful for those who focus on long-term value.” As the year unfolds, Singapore’s stock market will remain a focal point for investors seeking resilience and growth amid global economic shifts.
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