Singapore market hits record as valuation room runs out

Investors are no longer paying up for sector exposure alone.

The Straits Times Index reached a record high of 5,774.21 on 11 August and ended August up 2.3%, but SGX said the month's results season made clear that further gains will depend on companies delivering earnings rather than benefiting from favourable industry conditions alone.

With the index already trading at elevated valuations after an 8.8% gain in July, investors shifted focus during August's reporting season from sector exposure to execution, assessing not just profit growth but how resilient businesses were to a mixed external environment and how efficiently they were operating at the company level.

The external backdrop was uneven. Rising US Treasury yields and expectations of higher-for-longer interest rates weighed on valuations. Nvidia's results reinforced confidence in AI investment demand, whilst investors tracked policy support from Beijing as Chinese growth concerns persisted alongside developments in semiconductor trade restrictions and global supply chains.

Bloomberg consensus target prices for the STI rose from 5,884 at end-July to 6,159 by end-August as analysts raised valuation expectations alongside the market's advance.

Institutional flows rotated toward property developers during the month. Real estate excluding REITs recorded net inflows of S$124.4m, with City Developments, Hongkong Land and UOL accounting for roughly 95% of the improvement.

All three reported resilient first-half results whilst continuing to trade at discounts to book value. The rotation followed a prolonged period of strong bank performance that had concentrated portfolios in financial services.

Year to date, cumulative institutional flows remained concentrated in industrials and technology at approximately $960m and $310m respectively. Financial services, REITs and telecommunications remained the largest outflow sectors at approximately $1.42b, $1.22b and $489m.

Overall cumulative net outflows rose from approximately $1.3b at the end of July to approximately $1.9b at the end of August.

Plantation stocks were amongst the month's strongest performers, with Bumitama Agri and First Resources each gaining 37% and Kencana Agri rising 34%, supported by crude palm oil prices climbing above RM5,000 per tonne and double-digit first-half earnings growth across the sector.