UOB Kay Hian has raised its Straits Times Index (STI) target to 4,602, reflecting an 8% upside, following a resilient first half of 2025 where 75% of Singaporean companies met or exceeded earnings expectations. Despite challenges such as tariff uncertainties and a strong Singapore dollar, banks and real estate investment trusts (REITs) have led the way, delivering stable earnings and positive rental reversions.
The report highlights that banks, despite facing net interest margin compression, have maintained resilient earnings, with DBS and OCBC showing stable performance. The banks’ attractive dividend yields, particularly OCBC’s 5.9% for 2025, are noted as key factors supporting the STI. Additionally, the Monetary Authority of Singapore’s (MAS) allocation of $800m (S$1.1b) in new funds from the Equity Market Development Programme is expected to provide further market support.
Consumer companies like Sheng Siong and Food Empire have shown strong revenue growth, whilst DFI Retail has rewarded shareholders with a significant interim dividend following a robust performance. In the healthcare sector, Raffles Medical has reported revenue growth despite rising manpower costs.
The report also mentions that REITs experienced positive rental reversions, with Digital Core REIT achieving triple-digit increases. UOB Kay Hian has upgraded its ratings for City Developments and Venture, citing strong divestment momentum and improved capital management.
Overall, UOB Kay Hian’s analysis suggests that the STI’s current valuations are not overstretched, trading at a discount to long-term averages, and anticipates continued growth into the latter half of 2025 and beyond.
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