It tilts more towards growth and volatility compared to the STI, making it a preferred vehicle for investors seeking higher-growth
THE SiMSCI Index (MSCI Singapore Free Index) Futures contract is a derivative instrument based on the SiMSCI Index, which measures the performance of the large and mid-cap segments of the Singapore market.
The index comprises 16 constituents and covers about 85 per cent of the free float-adjusted market cap of the Singapore equity universe.
The SGX SiMSCI Futures contract is the most liquid equity index futures contract on the Singapore market. In Singapore dollar terms and as at market close on Dec 29, the SiMSCI Index recorded a year-to-date total return of 25.23 per cent.
As at Nov 28, the top six constituents include Singapore’s three local banks (DBS, OCBC, UOB), Singtel, as well as international-listed companies such as Sea and Grab.
Owing to this composition, the SiMSCI tilts more towards growth and volatility compared to the Straits Times Index, making it a preferred vehicle for investors seeking higher-growth and higher-beta exposure within Singapore equities.
We maintain a constructive view on Singapore equities, supported by reasonable valuations, robust fundamentals, and policy catalysts. Singapore’s reciprocal tariff rate of 10 per cent is the lowest compared to most Asian peers.
At the same time, Singapore is the only triple-A rated sovereign credit in Asia. The three-month Singapore Overnight Rate Average (Sora) is at its lowest since mid-2022, currently hovering around 1.19 per cent, down from about 3 per cent at the end of 2024.
Supported by lower rates, banking activities have remained steady with a loan growth of 6.6 per cent in October. Additionally, new home sales have reached record highs, hitting 10,624 new units (excluding executive condominiums) in the first 11 months of 2025, already topping the 6,469 units sold in the whole of 2024.
Valuations appear compelling on both a relative basis and absolute basis. At 16.4x last twelve months P/E ratio, the SiMSCI trades at about 40 per cent discount to the S&P 500’s 27.6x and below its own five-year average of 18.0x. A 12-month yield of approximately 3.8 per cent for the SiMSCI looks attractive in a backdrop of declining interest rates.
Upcoming initiatives such as the SGX-Nasdaq dual listing bridge (expected to go live around mid-2026), and the proposed measure to reduce board lot size for securities priced above S$10 from 100 units to 10 units, should further improve liquidity and boost investor participation.
Investor sentiment has been supported by the Monetary Authority of Singapore’s S$5 billion Equity Market Development Programme, which is likely to serve as a structural tailwind for local equities. Corporates are also increasingly leaning into improving shareholder returns through higher payouts and buybacks.
Over the longer term, we expect the three-month Sora to continue trending downwards, as we will likely see a more dovish Fed chair in May 2026, following the conclusion of Jerome Powell’s term.
Third-quarter earnings for Grab and Sea were mixed, with Grab gaining after narrowing its full-year earnings guidance. Sea plunged by 8 per cent after reporting earnings, as profit missed estimates due to increased expenses to defend its lead against stiff competition from TikTok Shop and Alibaba’s Lazada.
Key dates to monitor would be earnings from Sea on Mar 4, and Grab on Feb 19, which will impact the SiMSCI Index. Speculation has risen regarding a potential Grab and GoTo merger, with the combined entity potentially controlling an estimated 85 per cent to 90 per cent of the regional ride-hailing market.
Technical outlook
The daily chart of the SiMSCI Index Futures contract shows a strong rebound from its Apr 10 low of 327.50. Based on Fibonacci extension levels anchored to the August 2024 low, March 2025 high, and April 2025 low, we expect the contract to continue trending higher, with a potential year-end range between the 123.6 per cent extension level at approximately 490 and the 150 per cent extension level near 525.
Since breaking above the 76.4 per cent extension level (427.51) on Aug 13, following strong second-quarter earnings from Sea, the contract has largely traded sideways between the 100 per cent extension level (458.40) and the 76.4 per cent extension level.
Sea’s shares surged 19.07 per cent in a single session on the earnings release, providing a significant boost to index momentum.
Subsequently, the contract faced headwinds in October amid a resurgence in geopolitical tensions, after former US President Donald Trump threatened additional tariffs in response to Chinese export controls on rare earth metals. Sentiment gradually stabilised after both sides reached a trade truce, with a reduced tariff rate on China extended through November 2026.
Looking ahead, a daily close above 458.4 would confirm upside continuation, while a sustained close below 427.51, which coincides with the 200-day moving average, would negate the bullish technical setup. A decisive breakout above 458.4 could pave the way towards the 150 per cent extension level around 525.
Momentum indicators remain supportive. The 14-day Relative Strength Index (RSI) is currently hovering around 58.5, suggesting scope for further upside before the contract approaches overbought conditions.
The writer is senior investment analyst at Phillip Nova
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