• Support for longer-term economic and social growth drivers. The Singapore budget for 2025 included additional support measures to help Singaporeans and businesses cope with rising prices. We anticipate the SG60 goodies and other cash handouts to help boost consumption in the near-term. While there were sufficient measures announced to build Singapore's long-term competitive economic advantage through increased R&D investment, infrastructure development, and workforce transformation, the budget appeared to be more focused on improving social policies, such as family and child support measures.
• Winners. A strong GDP growth projection of 1-3%, along with continuing support for firms to not only manage with cost challenges but also explore development prospects, should benefit Singapore banks by keeping asset quality worries at bay. The series of cash handouts, vouchers, and enhanced wage support should boost Singaporeans' purchasing power. The benefits from this might potentially extend into domestic consumer sectors like hawker centres, coffee shops, food courts, and supermarkets. We also believe that retail REITs with suburban mall exposure will benefit. Plans to upgrade biosciences and MedTech research facilities, as well as the establishment of a new national semiconductor R&D fabrication centre, should attract more high-quality investments in the technology industry. This should benefit both semiconductor and technology manufacturers, as well as industrial REITs. The government's commitment to expanding Singapore's air hub and public transport network will benefit aviation and land transport industries for the foreseeable future.
• Losers. To support the local equity market, the Government will implement three tax benefits. While more information about the initiatives announced will be released later, the announced tax breaks will not be sufficient to increase market breadth or improve liquidity for the small and mid-cap companies that are already struggling to gain investor interest. In the short term, this could dampen the investor's confidence about the prospects of sustained growth for SGX's cash equities business.
• Reiterate our investment themes: Opportunistically build positions in i) Stocks that offer sustainable earnings growth or are undervalued, ii) stocks that offer sustainable high yields (except for the REITs sector), iii) stocks that will help mitigate the increased near-term volatility risk, iv) stocks that will benefit from the longer-term development of the Johor-Singapore Special Economic Zone (SEZ), v) small-cap stocks with earnings tailwinds, and vi) gradually build positions in the REITs sector as interest rates are expected to eventually decline.

Source: RHB Research - 19 Feb 2025