Singapore stocks are facing a turbulent year ahead as market sentiment turns bearish for 2021. The uncertainty surrounding global interest rates and potential trade restrictions with the upcoming change in US presidents are causing concern among market watchers.
Finance Sector’s Rally
Despite a strong performance by the three local banks pushing the benchmark Straits Times Index (STI) up 16.9% in 2024, analysts are cautious about the year ahead. The finance sector’s rally is expected to continue, with net interest income holding up well despite the Federal Reserve’s rate cutting cycle.
Market strategist Mr. Yeap Jun Rong from IG Asia highlighted the recovery momentum in wealth management activities, providing a significant boost to the banks’ earnings. He expressed optimism that as the Fed’s rate cutting process slows down, it could support interest income for the banks in 2025.
Challenges on the Horizon
Economists foresee a bumpy road ahead for Singapore in 2021, with demand from major trading partners like China, the US, and the European Union directly impacting the export-reliant economy. High US interest rates could hinder economic growth, affecting Singapore’s equities market.
Real estate investment trusts (REITs) are also expected to face pressure in the first half of the year, potentially rebounding later. Market strategist Geoff Howie emphasized the need for REITs to increase net property income, occupancy rates, and positive rental reversion to weather the storm.
Caution Amid Uncertainty
With the US presidential transition and possible trade tensions looming, investor confidence remains uncertain. The upcoming general elections in Singapore by November could further impact market stability.
Despite the challenges, economists urge investors to approach the year with cautious optimism. Singapore’s economy grew by 4% in 2020, surpassing expectations, but slower growth is anticipated in 2021. However, the region’s stable economic conditions and initiatives like the Johor-Singapore Special Economic Zone offer hope for the future.
As Singapore navigates through a challenging year ahead, all eyes are on the review group established by the Monetary Authority of Singapore to strengthen the local stock market. Measures to enhance market growth and improve regulatory regimes are expected to be implemented, providing a glimmer of hope for Singapore stocks in the face of uncertainty.