Navigating Singapore's Q1 GDP Growth: Where to Invest in a Tariff-Tainted Landscape

Singapore’s economy grew by 3.9% year-on-year in Q1 2025, narrowly outpacing expectations, yet the underlying data reveals a story of stark contrasts. While sectors like transport engineering and pharmaceuticals show resilience, others face headwinds from U.S. tariff risks and global trade uncertainties. For investors, this divergence creates a strategic opportunity to target industries leveraging Singapore’s structural advantages while hedging against external volatility.

Transport Engineering: A Beacon of Resilience

The transport engineering cluster, particularly aircraft maintenance, repair, and overhaul (MRO), has emerged as a standout performer. Despite broader manufacturing slowdowns, this sub-sector grew by 5% YoY, buoyed by strong demand for aircraft services amid rising global travel volumes. Singapore’s status as a regional aviation hub and its advanced MRO capabilities position it to capitalize on long-term trends in air traffic recovery.

Investment Play: Focus on companies like ST Engineering (SGX: S68), a leader in aerospace and defense systems. The stock has shown relative stability amid sector volatility, with a 12-month forward P/E of 12.4x—below its five-year average.

Pharmaceuticals: Navigating Tariff Uncertainties

While U.S. tariffs threaten Singapore’s export-driven sectors, the pharmaceutical industry stands out for its potential to mitigate risks. Singapore’s robust biotech ecosystem and free-trade agreements (e.g., the U.S.-Singapore Free Trade Agreement) provide a shield against tariffs. Despite U.S. threats to impose duties on certain pharmaceuticals, ongoing negotiations suggest a resolution could avert direct impacts.

Investment Play: Consider Bioscience (SGX: 40B), a biopharmaceutical firm with a strong pipeline of novel therapies. Its stock has underperformed in 2025 but trades at a 30% discount to its peers, offering asymmetry if trade tensions ease.

Construction: A Safe Harbor in Uncertain Waters

The construction sector grew by 4.6% YoY, driven by large-scale projects like Changi Airport Terminal 5 and public housing initiatives. This resilience is underpinned by domestic demand and long-term infrastructure plans, making it a natural hedge against external trade shocks.

Investment Play: Sembcorp Industries (SGX: U96), which has a diversified portfolio in construction and renewable energy, offers exposure to both infrastructure growth and climate-tech trends.

Hedging Against Trade Volatility

For investors seeking broader protection, sector ETFs like the FTSE Singapore Financial Index ETF (SGX: 90E) or DBS JSE Singapore Industrial Index ETF (SGX: 91E) provide diversified exposure to resilient sectors. Additionally, shorting trade-exposed sectors such as logistics or manufacturing via inverse ETFs could mitigate downside risks if tariffs escalate.

Conclusion: Act Now on Structural Strength

Singapore’s Q1 data underscores a clear path for investors: target sectors with structural advantages—transport engineering’s global competitiveness, pharmaceuticals’ trade agreements, and construction’s domestic demand tailwinds—to outperform in a turbulent environment. While near-term risks persist, these sectors are positioned to weather tariff storms and deliver alpha. The window to capitalize is narrowing—act swiftly before market consensus catches up.