As Singapore approaches its 2025 General Election, there has been plenty of fanfare during the campaign.
While I am not in a position to cast my vote in the Singapore General Election, it has been an informative and entertaining one. And tying it back to investing, it is intriguing to see how similar both can be.
In certain aspects, stocks are like politics. You have the supporters and the doubters. That helps win or lose votes. You have candidates that have become ministers but eventually get voted out.
Then there are the STI blue chips, the incumbents like the PAP. Most are solid, have fundamentals but costs a bomb (haha!).
And you have stocks outside of the STI that are similar to the opposition, always vying for a spot in the STI. Some have great prospects but need time and opportunities to prove their mettle. With little to no credentials, definitely not all of the candidates will be able to garner attention and show prospects, similar to the 500 stocks outside of STI.
Every candidate has their own strengths and weaknesses, same goes for the STI components. Not all are great, which is why I have never been a fan of the STI index fund knowing the breakdown.
While Samuel Lee is looking left and right for a career path in politics, I too have been doing the same on some of my favourite Singapore listed stocks.
Incumbent no-brainer STI stocks
There are STI stocks that you would not want to bet against. They have solid track record, great and proven fundamentals.
These stocks coincidentally share the same livery as the PAP logo as well!
In my opinion, and reiteration for those who have been long time readers, my support and believe in Singapore’s Terrific Trio of banking stocks – DBS Group Holdings Ltd (SGX: D05), United Overseas Bank Ltd (SGX: U11), Oversea-Chinese Banking Corporation Ltd (SGX: O39) has never wavered. The presence of these 3 banks are imperative in our lives, and also to Singapore’s economy. No one in their right mind would bet against these 3 banks.
Their business model remains evergreen in an ever-changing world – trade, financing and borrowings remain the de-facto way to fund growth and affordability of big purchases for enterprises and households.
Yes, some would argue they are a tad expensive, and the minimum sum to fork up for just a 1-lot exposure is a few thousand. Some would be anticipating stock splits if any, but if that were to happen, I think stock prices could go further up due to the increased affordability from a 1-lot exposure.
That said, they are not invulnerable – like the key figures within the government sector. They will shoulder the selloffs during bad times, but the trust of them bouncing back is imminent – barring any black swan events that could happen.
Incumbent STI stocks that are brilliant but facing tough times
Not every STI stock is in good shape – the same applies when Singaporeans look at the previous Cabinet ministers. Some have come under scrutiny for their underperformance and may have incurred irreversible damages (IYKYK!).
I see similarities between how higher interest rates have hurt both the blue chip REITs within the STI and also the living expenses of residents of Singapore. While many would agree that CDC vouchers won’t totally absolve a higher GST, the same theory applies to the interest rate and currency hedging done by S-REITs.
Mapletree REITs, be it the Pan Asia Commercial, Industrial or Logistics, have been reeling from tougher macroeconomic factors. All 3 REITs that used to be trading at sky high premium valuation, are now trading at a relatively cheaper valuation.
All 3 Mapletree REITs are trading close to their 10-year historical low price to book value, reflecting the near to mid-term scepticism that revolves around persisting higher interest rates and in a stagflation environment.
This time about, I am unsure how long will it takes for the next virtuous cycle to kick in. These REITs have proven to be rather prudent, but prudence alone cannot grow net property income and DPU.
Promising stocks outside of STI
While some of the above mentioned incumbent STI stocks promise stability and track record, there should be room for check and balance by including promising stocks outside of the STI.
I would be the first to admit, there really aren’t a lot of quality stocks outside of the STI. But the very few ones are already good enough for consideration due to their business model and also reach.
On the top of my head is iFAST Corporation Ltd (SGX: AIY), a leading global fintech company. The company has reported earnings of S$19.04 million for the Q1’25 ended March 31, up +31.2% YoY. This increase in profitability was driven by a turnaround of iFast Global Bank (iGB) and continuing growth in the group’s core wealth management platform business. With its asset light and regulated business model, many shareholders and analysts are confident of iFast’s long term prospects.
Singapore is also home to plenty of quality semiconductor companies. One of it that commands above average profitability is consumable parts and precision tool maker Micro-Mechanics (Holdings) Ltd (SGX: 5DD). The company has reported a net profit of S$3.18 million for the Q3’FY20’25, signifying a growth of +72.6% YoY. For the 9M’25, the company reported a +54.7% YoY growth in net profit of S$9.21 million. Sales to the US grew, but the stock previously encountered a sell-off together with the broad market due to the reciprocal tariffs, even though the company has a manufacturing base in the US as well. The selloffs proved to be just a knee-jerk reaction, as stock prices rallied back swiftly after the trade war steam cooled off and de-escalated.
Another notable electronics company would be UMS Integration Ltd (SGX: 558). It is a precision engineering group which specializes in manufacturing high precision front-end semiconductor components and perform complex electromechanical assembly and final testing services. The company recently announced that it has applied to the Securities Commission (SC) for a proposed secondary listing on the Main Market of Bursa Malaysia.
The company has eyes to expand its business in Penang, which is the Silicon Valley of Malaysia. The products it offers include modular and integration systems for original semiconductor equipment manufacturing. Other industries that it also supports include electronics, machine tools and oil and gas.
Verdict
Just like how Singaporean citizens reshuffle its politicians, investors too manage their portfolio by trimming away the underperformers and adding on to their winners.
The same mechanism also helps determine the STI components. The best and largest companies will compose and reflect Singapore’s economy.
The end goal of investing should be clear and concise. A newbie can continue to look left and look right, but those who have had bountiful of experience should have the iron in him to make tough and shrewd decisions whenever required.
And if the local stocks don’t promise outperformance, there is no wrong looking at foreign stocks in the US and Hong Kong right?
Vote and invest for your future and Singapore’s wisely. May the best candidates and businesses prevail!
p.s. if you want to learn how to analyse and find the best stocks to buy, Alvin shares our strategy at this live webinar.
