Why the STI&rsquo s record highs could just be the beginning

The market&rsquo s optimism is not merely rhetorical, it is showing up in trading data.

For years, the Singapore market was an easy one to overlook. A persistent cycle of delistings, an anaemic pace of new listings and the gravitational pull of more liquid markets abroad, particularly the US, meant that Singapore-listed stocks were treated by many investors as an afterthought. Capital flowed elsewhere and the Straits Times Index (STI) drifted in the background of more exciting narratives.

That story has changed. On Feb 12, the STI crossed the 5,000 mark for the first time in its history, buoyed by a combination of government reforms, improving corporate fundamentals and a renewed interest in Singapore equities from both retail and institutional investors.

To State Street Investment Management, the creator of Singapore&rsquo s first exchange-traded fund (ETF), the answer is clearly yes.

A milestone product

The State Street® SPDR® Straits Times Index ETF &mdash listed on the Singapore Exchange (SGX) under the ticker ES3 &mdash has a history almost as storied as the index it tracks. The SGX itself was formed in 1999 through the merger of three predecessor bourses. Just over two years later, State Street Investment Management launched ES3. The ETF was incepted on April 11, 2002 and listed on April 17 of the same year, becoming Singapore&rsquo s first ETF.

More than two decades on, ES3 has not merely survived, it has thrived. According to data from Bloomberg Finance L.P. the ETF remains the largest Singapore-domiciled ETF, tracking a benchmark with an index net market capitalisation of $452.37 billion as at Jan 31. That longevity, in a market where many products have come and gone, is no accident.

Jaruprateepkul points to the firm&rsquo s early and enduring presence in Singapore as a key differentiator from later market entrants. &ldquo Having established ourselves early in the Singapore market, we bring a wealth of local market knowledge and close relationships with regulators, exchanges, and industry stakeholders,&rdquo she says. &ldquo This long-term engagement enables us to deliver tailored solutions and provide clients with confidence that extends beyond product innovation. We place strong emphasis on education, thought leadership, and long-term ecosystem development.&rdquo

To Kunhee Park, State Street Investment Management&rsquo s ETF Equities Investment Strategist for APAC, the ETF&rsquo s success also comes from State Street Investment Management&rsquo s belief in listening first and understanding its clients&rsquo objectives.

&ldquo In-house and across our network, we strive to be more than just a partner &ndash we aim to be an essential one. We consult, collaborate, and create opportunities and solutions that help our clients get ahead,&rdquo he says.

Why you shouldn&rsquo t let the STI&rsquo s record highs deter you

When an index hits all-time highs, the instinct to wait for a pullback is understandable, but it is also, historically, a costly one.

While the STI has lagged markets like the US over recent years, he argues that the complexion of the Singapore market has meaningfully improved. &ldquo The recent uptick in performance, driven by strong fundamentals and state reforms, shows promise over the next few years,&rdquo he says.

Strong flows, strong liquidity

The market&rsquo s optimism is not merely rhetorical, it is showing up in trading data. ES3&rsquo s on-exchange liquidity has remained robust, with an average daily value traded of $3.80 million in 2025. According to Jarupratteepkul, both retail and institutional investors are driving inflows, with no discernible seasonal patterns to demand a signal that the interest is structural rather than speculative.

That breadth of investor base speaks to ES3&rsquo s versatility. It functions equally well as a core long-term holding for retail investors building wealth over decades, and as a tactical allocation tool for institutions seeking efficient exposure to Singapore&rsquo s blue-chip universe.

For investors who want to go deeper on the Singapore equities story, from the macroeconomic reform drivers to the granular flow and demand data, State Street Investment Management will be hosting a dedicated event on March 24. The session is designed for both professional and retail investors, particularly those with a long-term, buy-and-hold orientation, and will offer a closer look at why Singapore stocks deserve a more prominent seat at the portfolio table.

Citi Research&rsquo s Tan Yong Hong has raised his target prices for all three local banks for several reasons.

The analyst increased his target price estimate for DBS Group Holdings to $63.60 from $61.10, citing a higher long-term return on equity (ROE) estimate of 17.4%. Tan also expects the bank to sustain its ordinary dividend growth through 2028, implying an ordinary payout ratio of 70%.

&ldquo [The bank&rsquo s] better leverage offsets [its] slight earnings downgrade on trading income and provisions, marginally offset by higher NIM and opex (operating expenses) discipline,&rdquo he writes.

In his Feb 12 (US Eastern time) report, Tan noted that investors are likely to gradually look past DBS&rsquo s &ldquo soft&rdquo 4QFY2025 results and after Fitch&rsquo s upgrade of China Vanke&rsquo s long-term foreign- and local-currency issuer default ratings (IDR) to &lsquo CC&rsquo from &lsquo RD&rsquo after the completion of the distressed debt exchange (DDE).

The sharp non-interest income weakness is also likely &ldquo idiosyncratic&rdquo to DBS due to the bank&rsquo s active hedging policy.

Ahead of the other two banks&rsquo results, Tan believes Oversea-Chinese Banking Corporation (OCBC) is likely to see better non-interest income trends due to fewer loan-related issues, while United Overseas Bank (UOB) is expected to reduce its fee expenses. UOB is slated to release its results on Feb 24, and OCBC will announce its results on Feb 25.

UOB is also likely to focus on its non-performing loan (NPL) formation, although the bank needs to see &ldquo better growth&rdquo in wealth to drive a meaningful re-rating, Tan adds.

At OCBC, the analyst favours the bank&rsquo s integrated wealth proposition. Its sharpened focus on growing non-interest income in recent years likely contributed to higher-than-expected non-interest income in 2QFY2025 and 3QFY2025. This included initiatives such as cross-selling Great Eastern&rsquo s products to OCBC customers, developing higher-margin Great Eastern projects targeting high-net-worth wealth propositions, identifying revenue growth gaps, and launching a digital gold and silver trading platform in November 2021, likely boosting wealth fees amid price volatility.

As such, Tan expects OCBC to reallocate share buybacks, implying a FY2026 payout ratio of 60%.

Following DBS&rsquo s earnings announcement on Feb 9, Tan, after discussions with investors, sees the banks&rsquo NIMs stabilising with &ldquo upside bias&rdquo as funding costs get repriced, especially in US dollars (USD). He estimates DBS&rsquo s and OCBC&rsquo s loan-to-deposit ratios (LDRs) at 50%, and UOB&rsquo s at 56%.

With Singapore raising its GDP forecast, the analyst anticipates better loan prospects this year. He also expects moderated deposit growth, with the easing of maturing Treasury bills (T-bills) &ldquo reduc[ing] further flush to liquidity.&rdquo Some investors also expect OCBC and UOB to classify commercial real estate (CRE) accounts with their Hong Kong/Chinese developers.

Singapore banks preferred over SGX

Despite optimism over the Equity Market Development Programme (EQDP) and the $1.5 billion boost announced in Budget 2026, Tan maintains that Singapore Exchange (SGX) is less attractive compared with local banks. While the exchange is expected to benefit from the measures, he retains his &ldquo sell&rdquo call on the bourse, noting that its 12-month forward P/E now trades at 28 times&mdash close to the Hong Kong Exchange (HKEX) and above the JEG multiple.

However, Tan has increased SGX&rsquo s target price to $16 from $14.90, implying a 12-month forward P/B of 25 times, or 1 standard deviation (s.d.) above the mean. The new target price factors in SGX&rsquo s new securities daily average value (SDAV) of $1.6 billion.

Tan has a &ldquo buy&rdquo call on DBS and OCBC, a &ldquo neutral&rdquo call on UOB, and has also increased his target price for OCBC to $24.90 and UOB to $39, up from $20.30 and $33.70 previously. These updates follow corrections from database errors that were discovered.