Banks see STI climbing to 5,000–5,600

MAS committed $5b to its equity programme, with $3.6b already allocated.

The Straits Times Index (STI) is projected to reach the 5,000-level in 2026, thanks to the rollout of structural reforms, resilient corporate earnings, and a favourable macroeconomic shift, experts said.

In its latest report, UOB Kay Hian noted that the STI may reach 5,000 by the end of 2026, “implying an 8% upside from current levels.”

The brokerage firm said it retains its positive outlook for Singapore due to tailwinds from the Monetary Authority of Singapore’s (MAS) Equity Market Development Programme (EQDP) as well as a return to earnings growth for the stocks under its coverage.

“In addition, given the prevalence of large-cap blue-chip defensive stocks with strong Singapore dollar-based cash flow generation and relatively high dividend yields, the Singapore market will continue to attract fund flows,” the company said.

Singapore committed $5b to its EQDP, with $1.1b and $2.5b already allocated in two tranches to selected asset managers. Even before the funds were fully deployed, investors had begun paying closer attention to local stocks, said Jason Saw, group head of investment banking at CGS International Holdings Ltd.

The STI and the MSCI Singapore indices performed well compared with the majority of their peers in the Asia-Pacific, with an over 27% total return in 2025. On a relative basis, large caps in Singapore underperformed small caps, with positive sentiment in the latter segment being a direct result of the EQDP, UOB Kay Hian said.

“This positive sentiment was reflected in Singapore’s initial public offerings, which raised over $2.5b in 2025, significantly higher than in 2024. Notably, and for the first time in the past three years, Singapore banks’ share price performance was not a feature, although DBS outperformed its domestic peers,” it added.

Maybank, meanwhile, raised its 2026 STI target to 5,600 as the city-state now offers a fundamentally more attractive value proposition compared to 2010 to 2020, where a unipolar, low-rate, low-unemployment market environment kept uncertainty in check.

“Singapore enters 2026 with a rare combination of macro resilience, structural reforms and valuation support. This could underpin a widening ‘certainty premium’ vs. volatile global peers,” the bank said.

Renewed large-cap reforms can accelerate capital returns, whilst SMIDs remain inexpensive. MAS reform implementation and directed liquidity are expected to drive significant value unlocking, whilst scaling AI could lift productivity and margins across sectors.

“As a result, earnings risk is on the upside. Catalysed with enhanced liquidity from market micro-structure enhancements and low interest rates, we expect the STI to rerate towards our new 5,600 target,” Maybank said.

“We believe larger liquidity from reforms encouraging higher retail participation and accelerating IPOs, together with falling interest rates dialling up risk appetites, are key catalysts for market re-rating in 2026E,” the bank said.