To The Moon

1. 1H26 Performance Review

Singapore’s equity market entered 2026 with stronger momentum, supported by firmer liquidity conditions, increased institutional participation, and clearer sector drivers.

$Straits Times Index(STI.SI)$extended its gains through the first half of the year. Performance remained anchored by the banking sector, supported by sustained net interest income, capital return visibility, and continued investor allocation toward balance sheet strength. Financials remained a core pillar of the index, reflecting both earnings resilience and their weighting influence within the STI.

The STI formed all-time highs in June 2026 above 5,200, supported by continued ETF inflows and steady participation across the benchmark. This has seen the combined AUM of the two ETFs tracking the STI surpass S$5 billion, reinforcing the role of passive and index-linked flows as a stabilising component of market demand.

Beyond the banks, Industrials and Technology played a larger role in shaping broader market participation. Technology stocks linked to semiconductor and electronics supply chains were supported by ongoing capital expenditure cycles in artificial intelligence, cloud infrastructure and high-performance computing. This coincided with stronger earnings momentum and valuation improvement across selected names. Importantly, this was not uniform across the sector, with differentiation increasingly evident based on order-book visibility, customer concentration and exposure to specific parts of the semiconductor value chain.

Trading activity also broadened beyond index heavyweights. Within the small- and mid-cap segment, liquidity conditions improved alongside tighter bid-offer spreads and increased institutional engagement. Median turnover, valuation multiples and net institutional flows all showed year-on-year improvement, with technology and industrial names among those seeing stronger participation. In several cases, reductions in bid-offer spreads and higher average daily value traded levels supported improved execution for institutional investors, lowering entry frictions in previously under-traded names.

This was also reflected through continued inflows into index-linked and institutional investment channels, pointing to sustained engagement across the broader market. At the same time, the interaction between passive flows and active positioning became more visible, with index inflows supporting beta while active capital drove dispersion across individual names.

Market participation broadened, with capital extending beyond larger-cap names into segments where earnings drivers, liquidity and execution visibility are more differentiated. This broadened participation, however, remained uneven, with capital selectively rotating into names demonstrating clearer earnings delivery rather than moving across the entire SMID universe.

Sector rotation was visible through the half. Financials maintained a dominant position, while capital also moved toward growth- and capex-linked segments, particularly technology, engineering and infrastructure-related industries. Yield-sensitive sectors, including REITs, faced a more mixed backdrop, reflecting higher-for-longer rate expectations and funding cost sensitivity. Within REITs, divergence was evident across subsectors, with logistics and data centre exposure generally showing more resilience relative to commercial and office-linked assets.

A defining feature of 1H26 has been selectivity. Capital flows have generally concentrated in companies with identifiable macro tailwinds, visible order books, stronger earnings drivers and clearer capital allocation frameworks. This reflects a shift in market behaviour, where investors are increasingly distinguishing between cyclical uplift and structural earnings growth.

Capital markets activity also remained active. Listings, placements and secondary fund raisings continued across sectors, with funding increasingly aligned to execution pipelines, strategic priorities, balance sheet management and capital recycling. The continued use of placements and follow-on offerings highlights a more mature capital market structure, where listed equity is increasingly used as a flexible funding tool rather than a one-off event at IPO.

Corporate activity also contributed to market depth, with stake changes, block trades and ownership transitions reflecting ongoing repositioning among strategic and financial investors. This included continued participation from institutional investors, family offices and strategic shareholders, supporting liquidity and price discovery across segments of the market.

Buyback activity remained elevated across selected large-cap names, reinforcing capital discipline and, in some cases, providing price support amid broader market volatility. This reflects a continued focus on capital return as part of overall shareholder value frameworks.

Overall, 1H26 showed three clear shifts: continued index resilience, broader participation across selected SMIDs, and a more selective allocation environment driven by execution visibility, liquidity conditions and differentiation in earnings outcomes across the market.

2. Macro Focus for 2H26

The macro setting for 2H26 remains resilient, but more demanding. Growth is still holding, while cost pressures, energy risks, tighter financial conditions and trade uncertainty are becoming more important for sector and stock outcomes. The key shift is not in growth direction, but in how multiple macro variables are now interacting, creating greater dispersion across sectors, margins and capital allocation outcomes.

Singapore’s outlook into the rest of 2026 remains one of moderating but resilient growth. MTI maintains GDP growth at 2.0 to 4.0 per cent. $UOB(U11.SI)$ economists have since upgraded their 2026 GDP growth forecast to 4.0 per cent from 3.2 per cent, citing sustained AI-related momentum, stronger recent industrial output, and a reduction in downside risks as energy supply conditions normalise. This places Singapore at the upper end of regional growth expectations, but with a wider-than-usual range of outcomes depending on external conditions.

High-frequency conditions remain firm. S&P Global reported May PMI at 56.7, indicating continued expansion in output and demand, although input costs remain elevated and margins are tightening. The divergence between strong top-line activity and rising input costs is becoming more pronounced, with margin compression increasingly evident across manufacturing and services sectors.

Singapore’s growth backdrop continues to be supported by electronics demand, with recent industrial production and non-oil domestic exports reflecting momentum across semiconductor and precision engineering segments. UOB’s June macro note also highlighted that electronics remained broadly resilient, supported by infocomms, electronics and semiconductors on robust AI-related demand. This reinforces the role of global technology demand as a primary external driver for Singapore’s industrial cycle, particularly in segments linked to data infrastructure and advanced manufacturing.

The external backdrop is shifting. MTI has highlighted expected US tariff reinstatement in 2H26, reinforcing transmission through trade and domestic channels alongside softer global demand. This keeps the focus on trade exposure, supply chain positioning and execution capability, rather than headline growth alone. Companies with diversified supply chains and flexible production footprints are therefore better positioned to manage tariff and trade-related disruptions.

Energy remains a key swing factor. $OCBC Bank(O39.SI)$ ’s May 2026 global outlook noted that while global growth momentum remained resilient into 1Q26, prolonged Middle East tensions were increasing stagflation risks amid persistently elevated energy prices. This is now visible at the firm level, with an April 2026 SBF poll showing two in three Singapore businesses already moderately to severely impacted, driven by energy, shipping and demand pressures, alongside rising cost strain and weaker SME confidence. Energy has therefore shifted from a background variable to a primary driver of cost inflation and margin pressure across the economy.

This is reflected at the asset level, where Singapore’s private residential market continues to see firm sell-through rates and stable Government Land Sales tender pricing, even as transaction volumes moderate in a more selective environment, according to FPA Financial Corporation. The divergence between pricing resilience and softer volumes reflects a more selective demand environment, rather than broad-based weakness.

Across sectors, the implication is increasingly clear. Electronics, precision engineering and capex-linked services remain supported by structural demand. Energy-exposed and trade-sensitive segments, including petrochemicals, transport and fuels trading, face more pressure from higher input costs, logistics disruption and shifting trade flows. This results in a wider dispersion of earnings outcomes, even within the same industry groups.

Structural investment drivers remain intact. Singapore has risen to 8th in Kearney’s 2026 FDI Confidence Index, up from 15th last year, in an assessment written for EDB by Soon Ghee Chua of Kearney. Banking-system balances also remain elevated, with non-bank deposits at S$2.10 trillion in April 2026 versus S$1.96 trillion a year earlier, while amounts payable to banks outside Singapore rose to S$847.8 billion from S$712.3 billion, pointing to a larger external funding and deposit base consistent with Singapore’s role as a conduit for cross-border liquidity flows, based on MAS banking system liabilities data. This depth of capital reinforces financial system stability while supporting continued investment activity.

Global financial conditions remain tight. US Treasury yields remain elevated, while the US dollar has strengthened. The tightening effect is being transmitted through foreign exchange, funding conditions and valuation discipline, rather than only through further moves in rates. This highlights the importance of currency dynamics as a key transmission mechanism for global monetary conditions.

This matters for Singapore because the transmission runs through capital flows, funding sensitivity and sector positioning. A stronger US dollar and elevated yields affect leveraged and yield-sensitive segments, while reinforcing the market preference for balance sheet strength, earnings visibility and disciplined capital allocation. Sectors reliant on external funding or carrying higher leverage are therefore more exposed to tightening liquidity conditions.

These conditions are increasingly shaping how capital is allocated. Investors are placing more weight on execution visibility and resilience as cost pressures, demand dispersion and trade uncertainty build. Macro conditions are therefore not just influencing direction but increasingly determining relative performance across companies and sectors.

2H26 is characterised by resilient but moderating growth, externally driven inflation risks and tighter financial conditions, with increasing dispersion across sectors and companies.

3. Guidance and Execution

Guidance and disclosure are becoming more important in this environment. Forward guidance anchored to operating drivers and explicit assumptions helps narrow expectation ranges and improve price discovery, supporting more disciplined capital allocation toward companies with clearer execution visibility.

This is evident in recent disclosures. For example, Frencken Group, despite softer recent performance, provided detailed FY26 guidance with segment-level visibility and a clearer 2H26 recovery profile.

The guidance highlights demand normalisation, supported by order flow, ongoing programmes and capacity expansion, linking expected outcomes to identifiable drivers.

This has been reflected in market positioning, with analyst sentiment improving following the update.

Guidance is not about forecasting precise outcomes. Its role is to link expected performance to operating drivers, capital allocation and underlying assumptions that investors can test over time. This makes execution easier to verify and reduces information gaps between companies and the market. In a selective, revitalised market, guidance is positioned to become a bigger differentiator.

5. Unique Highlights of SGX Markets $SGX(S68.SI)$

Singapore’s market is compelling now because it combines income, financial resilience, regional connectivity and exposure to global structural themes within one market. This positioning has become more relevant in the current environment, where global capital is increasingly balancing growth exposure with stability, liquidity and execution visibility.

First, the market offers a balanced mix of income, resilience and growth. REITs remain a core component of the Singapore equity market, offering income visibility through contracted leases, occupancy profiles and asset-backed cash flows. Higher interest rates have created headwinds, but the sector remains important for investors seeking listed real estate exposure and yield-linked allocation. The differentiation across REIT subsectors has also become more pronounced, with logistics, industrial and data centre exposures generally demonstrating greater resilience relative to office and retail segments, reflecting underlying demand dynamics.

Second, the banking sector remains a major anchor. Singapore banks are well capitalised, supported by strong regulatory oversight, broad deposit bases and established shareholder return frameworks. Their role within the STI gives the index a defensive earnings foundation, while maintaining exposure to regional wealth, trade and financial flows. In addition, capital return through dividends and buybacks has reinforced their position within portfolios, particularly in an environment where income and capital discipline are increasingly valued by investors.

Third, Singapore provides listed exposure to global growth themes. Technology, engineering, infrastructure and logistics-linked companies provide exposure to AI infrastructure, semiconductor supply chains, aerospace, energy transition, data centres and regional capex. These are not isolated themes. They connect directly to Singapore’s role as a trade, finance and execution hub. This allows investors to access global demand drivers through locally listed companies, linking external growth cycles to domestic market participation.

Fourth, Singapore continues to serve as an ASEAN gateway. Many Singapore-listed companies operate across multiple markets, giving investors exposure to regional growth while remaining within a stable regulatory and market infrastructure framework. This is particularly relevant as global capital becomes more focused on resilience, supply chain reliability and regional diversification. In this context, Singapore’s positioning as a hub for both capital and operational execution strengthens its role within regional equity allocation.

Fifth, capital formation has evolved. Companies increasingly return to the market through placements, rights issues, secondary offerings and other funding tools as they scale. This supports a more active capital market lifecycle, where listing creates access, and subsequent funding supports execution. This shift also reflects greater flexibility in how companies manage balance sheets and fund growth, with capital raising increasingly aligned to specific projects, expansion plans and strategic milestones.

Corporate activity has also expanded alongside this trend, including stake changes, block trades and strategic investments, contributing to liquidity and price discovery. The presence of institutional investors, family offices and strategic shareholders has added additional depth to the market ecosystem.

Finally, governance and disclosure remain central to Singapore’s market proposition. Transparency, investor protection and consistent reporting provide the foundation. The next layer is stronger guidance, clearer operating metrics and more disciplined communication of value creation. This increasingly supports more efficient price discovery and allows investors to differentiate between companies based on execution rather than narrative.

The market opportunity is therefore not only about index level performance. It is about a market where liquidity is improving, participation is broadening, and capital is increasingly differentiating based on execution, visibility and discipline. In this environment, Singapore offers a combination of stability and access to growth that is difficult to replicate within a single market.

6. Conclusion

Singapore’s equity market in 2026 reflects a shift toward greater depth, broader participation and stronger alignment with global macro and structural trends. This is not just a cyclical recovery, but a broader evolution in how liquidity, capital and execution interact across the market.

The first half demonstrated index resilience and meaningful broadening beyond large-cap names. The second half is likely to be more selective, with performance shaped by execution, sector positioning, funding sensitivity and macro conditions. Dispersion across sectors and companies is increasing, and this is becoming a defining feature of market behaviour rather than a temporary condition.

The market is not lifting all stocks equally. That is the key point. Capital is becoming more selective, but also more engaged where the evidence is clear. Flows are no longer driven solely by index exposure or thematic positioning, but increasingly by earnings visibility, balance sheet strength and the ability to execute against demand.

In a global environment where investors are seeking clarity, balance sheet strength, liquidity and disciplined execution, Singapore offers a market built around stability, connectivity and increasingly visible growth exposure. This positioning is reinforced by its role as a capital hub, where global demand drivers are transmitted through locally listed companies with regional and international exposure.

The next stage of market development will depend less on broad macro beta and more on whether companies can make value creation visible, measurable and repeatable. This places greater emphasis on guidance, disclosure and capital discipline as key drivers of investor confidence and valuation support.

That is where Singapore’s market transformation becomes relevant: not as a short-term market move, but as a shift in how capital, companies and investors engage. The opportunity increasingly lies in identifying companies that can translate strategy into outcomes within this evolving framework, where execution, visibility and capital alignment determine performance.