Singapore’s Stock Market Soars to New Heights
As 2024 comes to a close, Singapore’s Straits Times Index (STI) is on track to be the best-performing stock market index in Southeast Asia. The index, which tracks the 30 largest companies by market value traded on Singapore’s stock exchange, has seen a remarkable 15% increase this year.
A 17-Year High
In the first week of December, the STI reached a 17-year high of 3842, just shy of its all-time high of 3906 in 2007. Although the index has slipped slightly following the U.S. Federal Reserve’s recent comments, its rally has been gaining momentum since September.
The Big Three Banks Lead the Charge
The STI’s impressive performance is largely attributed to the strong showing of Singapore’s three largest banks: DBS, United Overseas Bank (UOB), and Oversea-Chinese Banking Corporation (OCBC). These banking giants, which account for more than half of the STI’s weight, have seen significant gains this year. DBS shares have surged 41.6%, while OCBC and UOB shares have risen 26.9% and 25.8%, respectively.
A Different Story for Other Large Companies
In contrast, other large companies on the STI have not fared as well. Wilmar International, the largest company by 2023 revenue on the STI, has seen its shares decline 15% this year. Singapore Airlines, the country’s flag carrier and a constituent of the STI, has also experienced a 2.75% drop in 2024.
Interest Rates and Wealth Management Fees
The main driver behind the STI’s success is the U.S. Federal Reserve’s slower-than-expected interest rate cuts, which have helped local banks avoid severe narrowing in net interest margins. Additionally, better-than-expected growth in wealth management fees and a surprise share buyback announcement from DBS have contributed to investor optimism.
Optimism Heading into 2025
Singapore’s banking CEOs are optimistic about the future, despite potential uncertainties surrounding a second Trump administration. They believe that new Trump policies could lead to increased investment in Southeast Asia through Singapore, benefiting banks like DBS and OCBC.
Analysts Weigh In
While some analysts are optimistic about the banks’ performance, others are more cautious. They argue that the strong performance of Singapore’s banking sector raises the bar for 2025, leaving less room for growth.
Overall, Singapore’s Straits Times Index has had an impressive year, driven largely by the strong performance of its three largest banks. As the year comes to a close, investors will be watching closely to see how the index performs in 2025.
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