Inflation fears tied to U.S. policies could boost Singapore equities

Experts said investors will likely shift to safe havens like Singapore amidst uncertainty.

The equity market in Singapore could gain from inflation uncertainty tied to new U.S. tariff and immigration policies, Morgan Stanley (MS) experts said.

MS experts said policy shifts from the new Republican administration in the US could have widespread effects on global markets, including Singapore.

Although the policy direction seems settled, uncertainty about the timing and details of these measures – critical factors for investment decisions – could reshape market expectations.

Potential inflationary impacts from US tariff and immigration policies are key unknowns, likely contributing to fluctuating interest rate expectations in 2025.

Amidst this uncertainty, MS investors may shift to defensive equity allocations, increasing their focus on safe havens like Singapore.

In addition to the U.S. effect, MS said Singapore’s stock market stands to gain from local government initiatives to revitalise its struggling market.

"The combination of stronger political will and low market expectations reinforces our belief that upcoming initiatives could have a significant positive impact, even if the details are yet to be finalized," MS said.

According to the experts, "The new measures will likely aim to enhance stock trading liquidity through capital injections, potentially boosting valuation multiples by up to 20% and narrowing the gap with global benchmarks."

MS predicts 2025 will be another "fruitful" year for Singapore, despite challenges in the regional market.

The re-rating of below-trend valuation multiples, driven by market reforms and reversing fund outflows, is expected to underpin this growth.