[SINGAPORE] The Republic’s domestic-oriented stocks could emerge as spillover beneficiaries amid tariff volatility in spite of Singapore’s high trade dependency, said Maybank.
That includes sectors such as property and consumer as potential winners, it said.
In a Friday (Apr 25) research report, Maybank analyst Thilan Wickramasinghe said that the city-state could offer a “relative safe haven” amid global growth challenges as tariffs create volatility.
“A low baseline tariff, resurging domestic demand from construction and an election Budget, plus a national balance sheet capable of delivering aggressive stimulus if needed, should provide some cushioning as markets reconfigure to the new world order,” he said.
Singapore economy could absorb shocks, cushion tariff blow
“While Singapore’s external trade dependency is high, we think the domestic economy may have bandwidth to absorb the worst of the shocks,” said the analyst.
Maybank named two drivers: a construction boom, and the 2025 election Budget.
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A construction boom is under way, said the bank, with contracts awarded recording a 58 per cent year-on-year surge for the year up until February. This was driven by both public housing and private projects such as Changi Airport Terminal 5 or Tuas Port.
The 2025 Budget is another area that is “delivering generous transfers” which could boost domestic stocks, Wickramasinghe noted.
“The government has ample dry powder to introduce more fiscal stimulus,” he said.
The estimated accumulated fiscal surplus over the current electoral term is S$14.3 billion or around 1.9 per cent of the gross domestic product, he said. This can be drawn over FY2025 without needing to tap past reserves.
Moreover, the Singapore government has historically deployed strong stimulus during “times of extreme stress”.
For instance, during the global pandemic five years ago, fiscal stimulus was raised to 14.4 per cent of the GDP under the Covid-19 Stimulus Package alongside a further 8 per cent of GDP from past reserves drawdowns.
“Combined, these factors could support relatively better domestic earnings visibility,” he said.
Potential winners
The report screened Singapore-listed stocks with a market capitalisation above S$400 million that derive over 50 per cent of revenues locally, as these could benefit from domestic stimulus. As a secondary criterion, it surveyed stocks generating revenues from China and South-east Asia, which could gain on supply chain shifts from tariff arbitrage.
“Our screening shows property – especially real estate investment trusts (Reits) and construction – industrials, consumer and healthcare are potential winners,” said the analyst.
He said that banks were excluded from the screening. “While the sector derives more than 50 per cent of income from Singapore, they are much more directly linked to the global trade cycle, thus not fully reflecting pure domestic consumption.”
Noting that stocks related to real estate and Reits accounted for more than half of the screened list, Wickramasinghe said that falling domestic benchmark rates should be a positive signal for Reits.
Stress tests conducted under global financial crisis-level scenarios have indicated that retail and industrial rents would remain resilient, he added.
Among the Reits, CapitaLand Integrated Commercial Trust, Frasers Centrepoint Trust and Mapletree Pan Asia Commercial Trust screened favourably, he added.
Besides Reits, property development and construction companies – including Bukit Sembawang Estates and OUE – emerged as attractive opportunities.
According to Wickramasinghe, industrial and utilities companies with long-term offtake contracts and strong order books are well-positioned to benefit domestically. These include names such as Sembcorp Industries and Keppel.
Consumer and healthcare sectors could similarly see upside from “domestic spillover demand driven by fiscal stimulus”, he added, with screened names such as Kimly.
Transport and communication companies such as SBS Transit and Vicom are expected to demonstrate resilience supported by steady domestic demand.
