JPMorgan lifts Singapore stock target to 6,500 after record rally
Singapore's benchmark equity index is heading for a fifth consecutive quarterly gain on the back of bank earnings and a favourable growth-inflation mix, but concentration risk and stretched valuations are prompting some fund managers to trim exposure.
JPMorgan Chase raised its target for Singapore's Straits Times Index to 6,500 on August 11, implying roughly 13% upside from Friday's record close of 5,743.59. The call caps a remarkable run: the index has climbed 23% this year to a string of all-time highs, extending a similar advance in 2025 and putting it on course for a fifth straight quarterly gain, the longest such streak in a decade.
The bank's analysts, led by Khoi Vu in Singapore, described the economic backdrop as "Goldilocks," citing robust growth fuelled by technology exports alongside productivity gains that are keeping inflation contained. In their view, that combination should sustain earnings-per-share growth and preserve fiscal headroom, justifying a re-rating closer to other developed markets.
Three banks, 60% of the index
The rally's engine room is narrow. DBS Group Holdings, Oversea-Chinese Banking Corp. and United Overseas Bank have each hit successive record highs, propelled by second-quarter results that beat analyst forecasts and by investor appetite for Singapore's expanding wealth-management sector. OCBC has been the standout, with shares up 61% this year and the best performance in the 30-stock gauge.
Together the three lenders now account for nearly 60% of the STI's total market capitalisation, up from 38% in July 2020. That concentration makes the benchmark less representative of the broader economy and more vulnerable to a sector-specific shock.
Bulls see a structural shift
Fund managers with long-standing positions argue the rally reflects more than cyclical tailwinds. Jupiter Asset Management, which holds more than 16% of its Asian-equity funds in Singapore against a benchmark weighting of about 3%, called the city-state "one of the most attractive developed markets in the world." Eastspring Investments points to structural inflows driven by wealth management and artificial-intelligence-related infrastructure.
BNP Paribas Asset Management's Ernest Chew, head of Asean equities in Kuala Lumpur, said Singapore is "gradually evolving from a traditional dividend and defensive market into a dividend-plus-growth market," adding that capital-appreciation opportunities are increasingly complementing income.
A firmer currency reinforces the case. The Singapore dollar has appreciated almost 6% against the US dollar over three years, supported by the Monetary Authority of Singapore's policy of guiding the currency stronger to temper imported inflation and by safe-haven demand amid geopolitical turmoil.
Valuation strain tempers enthusiasm
Not everyone is adding. Fidelity International has turned cautious, with portfolio manager Sui Chuan Yeo noting that valuations are the highest since the global financial crisis and that the STI is now the most expensive index within Asean. Fidelity has been "incrementally trimming" its Singapore exposure, citing uncertainty around global economic and geopolitical drivers.
The numbers back the concern. The STI trades at more than 16 times 12-month forward earnings, over two standard deviations above its 10-year average, and share-price gains have outpaced earnings growth.
Eastspring's Bryan Yeong acknowledges that upside will be "more selective" after the three-year rally but still sees opportunities in companies with earnings visibility and potential to unlock shareholder value. Whether that selectivity is enough to sustain the index's momentum, or whether the heavy bank weighting becomes a drag, is the question investors face heading into the fifth quarter of gains.
