Singapore's Surging Stock Market: Capital Inflows, Policy Tailwinds, and Undervalued Sectors in a Re-Opening Global Economy

Singapore's stock market has emerged as a standout performer in 2025, defying global uncertainties and rekindling investor optimism. The Straits Times Index (STI) has surged nearly 12% year-to-date, outpacing regional peers, driven by a confluence of policy-driven capital inflows, strategic sector rotations, and undervalued opportunities. As the global economy re-opens post-pandemic and recalibrates to shifting trade dynamics, Singapore's market is poised to capitalize on its unique position as a regional financial hub and innovation leader.

Capital Inflows: A Policy-Driven Catalyst

The Monetary Authority of Singapore (MAS) has been instrumental in fueling this momentum. In Q2 2025, the government launched the Equity Market Development Program (EMDP), a S$5 billion initiative to revitalize local equity markets. An initial S$1.1 billion was allocated to three asset managers—Avanda Investment Management, Fullerton Fund Management, and JPMorgan Asset Management—to enhance liquidity, equity research, and market participation. This injection has already triggered a rotation into sectors like industrials, property, and communications, as investors seek value beyond overvalued bank stocks.

The STI's 13-day winning streak, its longest in over two decades, underscores the impact of these inflows. By mid-September 2025, the index closed at 4,231.28, with JPMorgan analysts setting base and bull targets at 4,500 and 5,000, respectively. Macquarie Group projects an additional S$2–3 billion in private capital inflows by year-end, driven by regulatory mandates for fund managers to allocate assets locally.

Policy Tailwinds: Strengthening the Singapore Dollar and Market Infrastructure

Singapore's currency, the Singapore dollar (SGD), has appreciated over 6% against the U.S. dollar in 2025, bolstered by the MAS's exchange rate policy and the city-state's stable macroeconomic fundamentals. This strength has made SGD bonds and equities more attractive to ASEAN investors, particularly as global yields remain low. Additionally, the government's focus on improving market infrastructure—such as streamlining IPO processes and enhancing corporate governance—has lifted sentiment.

The Johor–Singapore Special Economic Zone (JSSEZ) is another policy-driven growth corridor. With cross-border infrastructure projects like the RTS Link set to open in late 2026, multinational corporations are accelerating investments in Johor, further diversifying Singapore's economic footprint.

Undervalued Sectors: Opportunities in Real Estate, Industrials, and Agribusiness

While the STI's rally has been broad-based, several sectors remain undervalued, offering compelling entry points for investors.

1. Real Estate & Industrial REITs
2. Hongkong Land Holdings (H78) trades at a P/B of 0.44, the lowest among STI constituents, despite a 91% share price surge in 2025. Its pivot to capital recycling and REIT structuring has improved capital efficiency.
3. Mapletree Logistics Trust (M44U), with a P/B of 0.84, owns high-occupancy logistics assets across Asia. Despite concerns over global trade tensions, its 7.3% dividend yield and exposure to e-commerce growth make it a resilient play.

4. Policy Support: Urban renewal programs and logistics infrastructure development are expected to stabilize valuations.

5. Industrial Conglomerates

6. Jardine Matheson (J36), trading at a P/B of 0.58, is restructuring its portfolio through asset sales (e.g., Cold Storage) to focus on high-margin operations. Its 45% underlying profit growth in 1H2025 highlights operational resilience.

7. Policy Support: Government incentives for industrial innovation and R&D provide long-term tailwinds.

8. Food Products

9. Wilmar International (F34), with a P/B of 0.72, is navigating regulatory challenges in Indonesia but has shown strong performance in its Food Products and Plantation segments. Singapore's food security initiatives could further bolster its operations.

Risks and the Road Ahead

Despite the optimism, risks persist. Global trade tensions, particularly U.S. tariff escalations, could dampen export-oriented sectors. Additionally, valuations in some stocks are stretching, with Goldman Sachs downgrading Singapore to “market weight” due to limited earnings growth projections. However, the government's fiscal flexibility, strong governance, and ongoing market reforms provide a buffer.

Investment Advice

For investors, the current environment favors a balanced approach:
- Sector Rotation: Allocate to undervalued sectors like industrials and REITs, which offer attractive yields and growth potential.
- Currency Hedges: Consider SGD exposure to capitalize on its strength against the U.S. dollar.
- Long-Term Focus: Prioritize companies with strong balance sheets and alignment with government policy, such as those in the JSSEZ or green building initiatives.

As Singapore's market continues to evolve, the interplay of policy tailwinds, capital inflows, and undervalued sectors positions it as a key player in the re-opening global economy. With the STI projected to test 5,000 by year-end, now is the time to reassess risk-reward dynamics and seize opportunities in this dynamic market.