Maybank Securities has marginally lowered its 2026 year-end target for the Straits Times Index (STI) to 5,500 points from approximately 5,600, citing modest downgrades to corporate earnings expectations amid a more challenging global macroeconomic environment.
The revision follows a 2% reduction in consensus earnings-per-share forecasts, driven primarily by higher energy costs linked to geopolitical tensions in the Middle East. While the adjustment is relatively modest, the research house continues to see room for the Singapore equity market to rerate, supported by improving market liquidity, corporate artificial intelligence (AI) adoption and the planned deployment of approximately S$4 billion under the Equity Market Development Programme (EQDP).
However, Maybank cautioned that sustained weakness in the performance of newly listed companies could weigh on the broader market. According to its analysis, around 60% of companies that debuted on the Singapore Exchange (SGX) over the past year are currently trading below their opening prices.
The research noted that continued weak aftermarket performance could discourage prospective issuers from pursuing listings in Singapore, potentially delaying IPO plans or prompting companies to consider alternative regional exchanges. Over time, a slowdown in new listings could reduce market diversity and limit opportunities for investors to access high-growth sectors domestically.
Looking ahead to the second half of 2026, Maybank remains constructive on sectors with strong earnings visibility and structural growth drivers. Technology manufacturing is expected to benefit from continued global AI-related capital expenditure, while industrial companies are supported by resilient domestic demand, infrastructure development and defence-related spending. Non-bank financials are also viewed favourably as market activity improves and EQDP capital is deployed. Banks, internet-related businesses and plantation companies were also identified as sectors offering a combination of earnings resilience, value creation opportunities and steady growth.
Within the banking sector, Maybank observed that earnings drivers are evolving as lower benchmark interest rates moderate net interest income (NII). While average NII has declined by approximately 5% year-on-year, this has been partially offset by stronger non-interest income, supported by wealth management, capital markets activity and regional trade flows. Asset quality remains healthy, with non-performing loan ratios averaging around 1.1%, while strong capital positions continue to underpin dividend sustainability. Against this backdrop, the research house identified DBS and OCBC as its preferred banking names.
Broader Macro Risks Remain in Focus
Despite the relatively constructive outlook, investors continue to navigate an increasingly uncertain global environment that could influence Singapore’s equity market over the coming 12 to 18 months.
Geopolitical tensions remain elevated across several regions, contributing to periodic spikes in energy prices and supply chain disruptions. Should commodity prices remain elevated for an extended period, corporate operating costs and inflationary pressures could weigh further on earnings expectations across multiple sectors.
At the same time, global monetary policy remains an important variable. While many central banks have begun easing interest rates, the pace and extent of future policy adjustments remain dependent on inflation trends and economic data. Any delay in policy easing or resurgence in inflation could tighten financial conditions and reduce investor risk appetite.
Global equity markets also continue to trade near historically elevated valuation levels in several developed markets, particularly within technology-related sectors. Although earnings growth has generally supported these valuations, any broad-based correction triggered by weaker economic data, geopolitical developments or shifts in investor sentiment could result in increased volatility across regional markets, including Singapore.
As an open, trade-dependent economy, Singapore remains closely linked to global economic cycles. Slower global trade growth, weaker external demand or heightened market volatility could affect corporate earnings, capital flows and overall investor sentiment, even if domestic fundamentals remain relatively resilient.
Nevertheless, Singapore’s market continues to benefit from several structural strengths, including a well-capitalised banking sector, relatively defensive market composition, stable dividend profiles and ongoing government initiatives aimed at enhancing capital market competitiveness. These factors may provide a degree of resilience should global conditions become more volatile, although external macroeconomic developments are likely to remain a key determinant of market performance.
Overall, Maybank’s revised outlook reflects a measured recalibration rather than a fundamental change in its view of Singapore equities. While the long-term investment case remains supported by structural reforms and improving market liquidity, the trajectory of the STI is likely to be shaped by both domestic initiatives and an evolving global macroeconomic landscape.