A tense global trade setting, uncertain US inflation outlook and a US Federal Reserve conflicted by president-elect Donald Trump’s policies “sets the tone” for a volatile 2025, DBS Group Research analysts Yeo Kee Yan and Foo Fang Boon note in a Dec 4 report.
They point out that Trump’s nomination of China hawks Marco Rubio and Mike Waltz as secretary of state and national security adviser respectively signals rocky US-China relations ahead. As a small-open economy with a small domestic market, a US-China trade war will impact Singapore’s GDP growth, Yeo and Foo add.
“A significant escalation of the trade war under Trump 2.0 could lead to a sharp global economic slowdown and a considerable deceleration in Singapore’s economic growth, approaching the lower end of Ministry of Trade and Industry’s 1%-3% growth forecast, implying muted q-o-q seasonally adjusted average rate over several quarters,” they note.
Despite uncertainties over US-China trade friction and a more hawkish interest rate outlook, Singapore’s earnings growth is seen picking up to 5.5% for FY2026 versus 3.4% for FY2025. The Straits Times Index (STI) also boasts an attractive dividend yield of 5.2% for FY2025 and 5.1% for FY2026, the highest among regional indices.
To this end, the analysts have set their end-2025 STI target at 3,950, pegged to a 11.8x FY2026 P/E, a 6% upside over a 12-month period.
For 2025, the top three themes to ride the more volatile year are Trump trade, stocks with earnings resilience and recovery as well as beneficiaries of the Monetary Authority of Singapore (MAS) review.
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Trump trade
With respect to Trump trade, the analysts have identified United Overseas Bank U11 (UOB), Seatrium, ComfortDelGro C52 , Venture Corp, Frencken, Grand Venture Technologies, Sembcorp Industries U96 and Singapore Technologies Engineering S63 (ST Engineering) as beneficiaries.
UOB benefits from a return of the high-for-longer or fewer rate cuts narrative and a less regulatory environment. This is supported by a stable 2025 economy and sector growth environment, coupled with sector yield above 5%.
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Meanwhile, Trump’s pledge to boost US domestic oil production places a cap on oil prices, with the analysts 2025 base case Brent forecast at US$70 ($94) to US$75/barrel (bbl). As such, Seatrium stands to gain from higher US oil and gas (O&G) capital expenditure (capex) activities, while ComfortDelGro and Singapore Airlines C6L can gain from lower oil prices.
Given the focus on technology, the analysts note that Venture, Frencken and Grand Venture are well-positioned to benefit from China+1 with key production facilities in Asean countries such as Malaysia and Singapore.
This is further supported by an optimistic outlook for the electronics and technology segment, bolstered by rising artificial intelligence (AI) adoption which provide a conducive environment for further expansion and investment efforts.
The pick-up in energy-intensive manufacturing and AI initiatives is likely to benefit utilities players such as Sembcorp Industries, with more long-term power purchase agreements contracted in recent years.
The US’s onshoring and return of manufacturing narratives proves positive for ST Engineering through its US transportation solutions provider subsidiary, Transcore.
On the other hand, REITs are the casualties of Trump’s mostly inflationary policies. As such, DBS’s REITs team are staying selective, with top picks Frasers Centrepoint Trust J69U , Mapletree Industrial Trust ME8U and Keppel REIT for their ability to deliver resilient returns, even if high-for-longer may return to the fore.
Stocks with earnings resilience and recovery
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The analysts continue to favour stocks with favourable sector outlooks, attractive dividend yields, lower costs or earnings that outpaces the STI’s projected 3.4% FY2025 growth.
The analysts have identified DFI Retail, StarHub CC3 , Singapore Telecommunications Z74 (Singtel) and ComfortDelGro as “stand outs”, given that they “tick all three boxes”.
DFI Retail’s disposal of loss-making Yonghui provides an earnings uplift and opens the potential for special dividend and considerable interest savings on deleveraging efforts.
Additionally, apart from being defensive plays with stable dividend yields, telecommunication stocks also offer a compelling 10% compound annual growth rate (CAGR) FY2024 to FY2026 earnings growth.
The analysts also highlight Seatrium and AEM Holdings AWX , which are poised to deliver triple-digit earning recoveries in 2025 amid improving outlook for the O&G and technology sectors.
Seatrium’s revenue and earnings visibility is underpinned by its strong orderbook in both O&G and renewable solutions, while AEM Holding’s earnings recovery is supported by Intel’s contributions from non-cancellable pre-orders.
Sheng Siong and ST Engineering are also expected to remain resilient amid market volatility, the analysts add. Sheng Siong’s defensiveness is underpinned by resilient domestic demand while ST Engineering’s robust earnings growth is underpinned by its positive business momentum across business segments and robust order backlog.
MAS beneficiaries
Lastly, the analysts highlight that any constructive move to uplift market liquidity, trading volumes and valuations will be seen as a positive outcome from the ongoing MAS equity market review, with Singapore Exchange S68 being the prime beneficiary.
There are three broad areas that may be the much needed steps to address perennial concerns of low trading valuations — encourage quality listings, improve liquidity, and re-evaluate regulatory structure. “Even as the benchmark STI made its multi-year highs during 2H2024, price-to-book valuations of 1.31x remain below the averages seen for the most parts in the 2010s,” Yeo and Foo add.
A more conducive backdrop could encourage companies to pursue value-unlocking initiatives. That said, the analysts have highlighted Thai Beverage Y92 , City Development, UOL and Singtel as their “buy” rated stocks with undemanding valuations and potential for value unlocking.
