Morgan Stanley Research has released its mid-year outlook for Singapore’s equity market, emphasising the city-state’s appeal as a safe haven amidst global market volatility. The report underscores Singapore’s defensive qualities, high dividend yields, and ongoing market reforms as key factors that limit downside risks whilst offering significant upside potential. The bank favours the Financial Services and Communication Services sectors, with a particular interest in small-cap opportunities.
Singapore’s equities have shown remarkable resilience, achieving a 13% total return in 2024, outperforming the MSCI All Country World Index’s 6% return. This performance is attributed to defensive investor allocations amidst global trade uncertainties. Morgan Stanley has raised its MSCI Singapore index target by 13% to 2,150, projecting a 17% total return over the next 12 months.
The report highlights Singapore’s strategic position to navigate geopolitical and trade uncertainties, which are expected to persist in a multipolar world. Despite easing global trade tensions, uncertainties surrounding US tariff rates and their inflationary impact remain significant market concerns.
Market reforms are a key driver of optimism, with the Monetary Authority of Singapore’s S$5b investment into actively managed funds expected to boost Singapore equities. Additional reform measures, potentially including a Value-Up programme, are anticipated later this year, which could further ignite investor interest.
Morgan Stanley’s Singapore Focus List includes Singapore Exchange, United Overseas Bank, Singapore Telecom, Sea Ltd, and CapitaLand Investment. The bank sees potential in the largest 20 non-REIT small-cap stocks, aligning with market reform priorities.
In summary, Singapore’s equity market is well-positioned to benefit from its safe haven status and ongoing reforms, offering attractive risk-reward opportunities amidst global uncertainties.
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