STI Hovering at 4,500: Is Singapore Set for a Breakout?

Market Overview - Singapore's Straits Times Index (STI) has surpassed 4,500, a level not seen in a decade, raising investor interest and speculation about a potential breakout after years of stagnation [1] - The rally is driven by recovering REITs, steady industrial performance, and strong earnings from major banks, despite mixed results among them [2][5] Bank Performance - DBS Group reported a net profit of S$2.95 billion for 3Q2025, while OCBC posted S$1.98 billion; however, UOB's net profit fell to S$443 million due to increased provisions [2][5] - DBS's total income increased by 3% YoY to S$5.9 billion, while OCBC maintained a strong capital return plan with a CET1 ratio of 16.9% [5] - UOB's profit decline of 72% was attributed to S$1.36 billion in credit allowances, including S$615 million in pre-emptive provisions [5] REITs and Industrial Stocks - REITs have stabilized, with CapitaLand Integrated Commercial Trust achieving a portfolio occupancy of 97.2% and a 3.5% YoY increase in distribution per unit (DPU) [3][10] - Sembcorp Industries reported an underlying profit of S$491 million for 1H2025, while Keppel Ltd's net profit surged 25% YoY to S$431 million, driven by real estate recovery [3] - The average distribution yield for S-REITs is around 6.2%, higher than global peers and Singapore government bond yields, indicating renewed strength in the sector [11] Industrial Sector Growth - Singapore's industrial companies are benefiting from trends in clean energy, infrastructure upgrades, and digitalization, contributing to the STI's rally [13][16] - Sembcorp's earnings have improved due to a focus on renewable energy, while Singapore Technologies Engineering reported a 20% increase in net profit to S$403 million [14] - New contracts worth S$4.9 billion were secured in 3Q2025, enhancing the order book in various sectors [15] Economic Indicators - Singapore's GDP grew by 2.9% YoY in 3Q2025, with total merchandise trade rising 6.6% in 2024 to S$1.29 trillion, indicating steady growth [17][18] - Despite the positive indicators, external risks such as geopolitical tensions and policy shifts could impact market sentiment and financial conditions [17][18] Investment Strategy - Investors are advised to focus on quality companies with steady earnings, strong balance sheets, and reliable dividends, particularly in the REITs and industrial sectors [19][20] - A diversified portfolio of well-managed companies is recommended to withstand market volatility and capitalize on potential long-term growth [19][20]