Money and Me: Singapore stocks - Where’s the value after the rally?

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Lance Alexander (0:19)

Well, Singapore's economy, as you know, grew 5.4% in the third quarter, according to advanced estimates released on the 14th of October.

But what does that mean for investors buying Singapore shares today? Efforts to strengthen the stock market, bringing fresh attention to listed companies. For investors, the question is whether businesses can deliver the profits and shareholder returns to sustain that interest. Where could the next opportunities come from, and how much optimism is already being reflected in share prices? Joining us on Money And Me is Robert St Clair, Managing Director and Head of Investment Strategy at Fullerton Fund Management. Robert, good morning to you.

Robert St Clair (1:04)

Indeed. Good morning, Lance, and good morning, Singapore. It's a pleasure to be here.

Lance Alexander (1:08)

Great to have you here. As I said, Singapore's economy grew 5.4% in the third quarter, moderating from that 6.2% in the previous quarter. Which parts of that growth are most likely to lift listed company profits, you think?

Robert St Clair (1:23)

Yes. So, I mean, it's a good point that you make, Lance, in terms of, you know, that we know that growth has been very strong, and it's across the board, actually, when we look at what the consumer sectors are doing, what the industrials are doing, as well as the financials. And it's important, too, that you made the distinction in terms of, you know, what really matters when we think about GDP, is how does it impact company performance that investors are exposed to? And of course, earnings growth this year has been very strong for Singapore's companies, in many respects, relatively stronger than the GDP performance. So if we think about earnings growth expectations for this year, they're around 7%.

And next year, Singapore stands out as one of the only markets where earnings growth is expected to be even stronger, and that's around 10%. So that is still a very favorable, fundamental earnings growth backdrop that harmonizes quite well with what we're seeing in the GDP data so far.

Lance Alexander (2:21)

Robert, so let's crystal ball gaze. What could drive Singapore stocks even further over the next 12 months?

Robert St Clair (2:27)

Yeah, so I think the important thing is to look back at the last couple of years in terms of how strong the performance has been. I think you made the point, a lot of good news has been priced into market. So in 2024, we had a 25% return. In 2025, just last year, it was almost a 30% return. This year, we've seen a peak year to date of around 24%.

It has now slipped down to about 18%.

I think for us, it's still a positive outlook for investment returns going forward. But returns are moderating because while the earnings growth is strong, the re-rating of the market is losing some of its momentum. And that's kind of understandable at the stage of the cycle because the investment environment is maturing. I think investors just need to keep their expectations well anchored. That we've had strong returns and it's still a positive outlook. But the 20 plus returns perhaps not sustainable going forward into next year.

Lance Alexander (3:30)

You know, the STI is not a balanced index. It is a bank heavy index dominated by the three locals, DBS, OCBC and UOB. We saw the three local banks take a hit recently. Is there a bit of a worry that it could happen again and impact those non-banking stocks in the STI because they get dragged down as well?

Robert St Clair (3:50)

Yeah, I think at the moment, you know, there's been, I guess, more uncertainties globally in terms of equity market performance because we all know that the cost of capital has increased quite significantly. We all know that, of course, that bond yields and developed markets have gone up a lot. Even in Singapore, bond yields have increased, but you know, not to the same extent. I think that there is some fear there that has, I guess, weighed on the financial stocks in Singapore. But if you step back and look at just the fundamentals behind financials performance in Singapore, loan growth is still very strong. So that's actually running at a double digit pace, almost 14 percent per annum, which is exceptional. You know, it's a very favourable environment for financials going forward. And I think the ongoing challenge that you've talked about is if we think about the STI, there are 600 companies listed. There is a lot of opportunities there beyond financials. And I think some of the important sectors that investors should also look at is industrials. Because, for example, global trade growth is still very strong, and Singapore is contributing significantly to that, and that is helping the performance of industrials.