CGS International analyst Lock Mun Yee believes several factors, such as the anticipated enhancement of market liquidity through the $5 billion equity market development programme (EMDP) by the Monetary Authority of Singapore (MAS) and sustained earnings, can provide tailwinds going into the rest of 2025.

Potential beneficiaries of the EMDP

On May 23, the MAS shared that it aims to shortlist suitable fund managers by the third quarter of 2025, after a few financial institutions alluded to progress made in distributing the $5 billion.

With this in mind, Lock has put forward eight stock suggestions that could benefit from the EMDP. These names have market capitalisations ranging from US$120 million ($154.9 million) to US$670 million and are not part of the benchmark Straits Times Index (STI). The EMDP funds were meant to be put into a diversified list of counters, as opposed to just the STI component stocks. These fund managers will also have to invest in Singapore equities as part of a thematic or regional focus.

Of the eight, BRC Asia, CSE Globaland PropNex were named as dividend plays with their dividend yields at 6.4% to 7.7%. Food Empire Holdings, Frencken Group, Pan-United Corporation and Q&M Dental Groupwere flagged as growth names as their earnings are projected to grow by a three-year compound annual growth rate (CAGR) of 8.2% to 12.8%. Finally, offshore and marine (O&M) player, Marco Polo Marine, was touted as a value play with the stock trading at a P/B of 0.73 times calendar year (CY) 2025.

Large-caps to weather ongoing tariff hikes and trade tensions

Despite the positive sentiment stemming from the anticipated liquidity addition, Lock believes investors also have to remain selective on their large-cap picks amid the challenging macro environment.

As such, she is recommending names such as SATS, SIA Engineering Company (SIAEC), Sembcorp Industries, Keppel Limited and UOL Group, as these companies are expected to see double-digit earnings growth in FY2025 and FY2026 and could see their share prices outperforming their peers.

“With the market focusing on capital management activities to drive return on equity (ROE) expansion, we believe companies with value unlocking prospects, as well as [the] ability to streamline their business models and drive cost efficiencies, would also attract investor interest,” Lock writes.

Sector ratings

Following the earnings and business updates for the 1QFY2025, CGSI has downgraded the commodities sector due to an uncertain outlook, as well as the Internet sector after the downgrade of Sea Limited to “hold”.

At the same time, CGSI upgraded its outlook on the consumer sector over its defensive outlook as it caters mainly to domestic consumption.

As at CGSI’s report on May 28, the brokerage is “overweight” on capital goods, consumer, construction, gaming, healthcare and REITs and “neutral” on banks, commodities, Internet services, property, technology, telecommunication companies (telcos) and transport.

On individual names, CGSI lowered its calls on Singapore Telecommunications(Singtel), Sea and Wilmar to “hold”. The brokerage also removed CapitaLand Ascendas REIT(CLAR), Keppel DC REIT and Yangzijiang Shipbuilding from its list of big-cap names to watch. Instead, SIAEC and Sats were included. Among the small- and mid-caps, BRC Asia, Frencken Group, CSE and PropNex were added, while Hong Leong Asiawas removed.

Earnings forecasts

Even though Lock is expecting average earnings for the overall Singapore market to grow by 6.2% in 2025 and 8.5% in 2026, the analyst has trimmed her core net profit projections by 1.2% and 0.2% for 2025 and 2026 respectively. The lowered estimates are mainly due to lower projections for banks, tech manufacturing, transport, commodities and REITs. Conversely, CGSI has lifted its projections for Internet services and capital goods companies.

At present, the Singapore bourse is trading at 13.9 times its 12-month forward P/E and offers a dividend yield of 5.5%. As such, Lock has maintained her year-end MSCI Singapore Free Index (SIMSCI) target at 411.7 points, although increased geopolitical and global trade tensions as well as slower-than-expected interest rate cuts are key downside risks.

On a m-o-m basis, Lock notes that Singapore Airlines(SIA) outperformed on a higher-than-expected 4QFY2025 EBIT, while Singapore Technologies Engineering(ST Engineering) is the best-performing stock year-to-date as at May 26, thanks to its strong orderbook and improved growth prospects amid a structural shift in the defence operating environment.

The STI closed at a month-high of 3,916.84 points on May 29.

Chart: CGSI