STI’s 8.8% July rally marks strongest gain since November 2020

Financial services led top-performing sectors.

Singapore equities recorded their strongest monthly performance in nearly six years in July, as the Straits Times Index (STI) climbed 8.8% amidst stronger-than-expected economic momentum, AI-related demand, and gains in financial stocks.

According to Singapore Exchange (SGX), the STI ended July at 5,628.50 points after reaching an all-time high of 5,713.19 points on 29 July.

Global markets delivered mixed results in July, with gains in Hong Kong, Singapore and selected Southeast Asian markets offset by declines in Japan, South Korea and China.

The rally marked a shift from the first half of 2026, when semiconductor stocks led market gains. Investors rotated into financial, industrial and transport counters as semiconductor-related names faced profit-taking.

“Unlike several North Asian markets, Singapore benefited from its heavier weighting in financial, industrial and transport-related stocks, helping local benchmarks outperform despite profit-taking in semiconductor-related names,” SGX said.

The STI’s 8.8% advance marked its strongest monthly gain since November 2020. The FTSE ST All-Share Index and FTSE ST Financials Index also recorded their strongest monthly performances since November 2020.

Singapore’s bank stocks rose 13.3% on average in July, led by OCBC, which remained the STI’s top-performing constituent.

Investors are now watching first-half 2026 results from the major banks for signs that strong non-interest income and loan growth can offset lower interest rates.

Financial services was the largest sector among July’s top-performing stocks with market capitalisations above $1b. Great Eastern Holdings, Pan-United and OCBC led the gains, with total returns of 34.6%, 19.3% and 17.5%, respectively.

Great Eastern reported higher first-half 2026 new business sales, embedded value and earnings, supported by stronger insurance operations and investment performance.

Institutional investors recorded net selling of $464m in July, bringing year-to-date outflows to $1.287b.

Institutional buying was concentrated in transport, infrastructure and industrial stocks, led by Singapore Airlines, Keppel and SATS. Singapore Airlines recorded the largest institutional inflow for the month, alongside an increase in its consensus target price from $6.77 to $7.21 as analysts raised earnings forecasts.

Sembcorp Industries recorded the largest institutional outflow in July, as its consensus target price declined from S7.06 to $6.71 ahead of its 13 August results announcement.

DBS Group Holdings posted the second-largest institutional outflow,

Retail investors bought $545m of Singapore shares during the month, lifting year-to-date inflows to $2.383b.

Singapore’s economic outlook improved, with private-sector economists forecasting GDP growth of about 3.5% in 2026 before slowing to 2.5% in 2027. The International Monetary Fund said the economy remains supported by AI-related semiconductor demand, infrastructure investment and a strong banking system.

The Monetary Authority of Singapore tightened policy in July, slightly increasing the rate of appreciation of the Singapore dollar’s exchange rate policy band.

Following the market rally, investors are expected to place greater emphasis on earnings delivery rather than further valuation expansion.

Singapore’s growth outlook continues to be supported by technology exports, construction activity, financial services and efforts to deepen market liquidity. However, market gains may increasingly depend on companies demonstrating earnings resilience, strong cash flows, dividend capacity and sustainable value creation.

Global interest-rate conditions remain a challenge for equities. The US Federal Reserve kept rates unchanged in July for the fifth consecutive meeting, citing ongoing inflation concerns.

With US economic activity and labour markets remaining resilient, elevated Treasury yields could continue to pressure valuations for equities, REITs and other rate-sensitive sectors.

Investors are now focused on five key market drivers, including AI-driven productivity, investment-led growth, infrastructure and connectivity, trade and technology fragmentation, and Singapore’s role as a global business hub.

“At the stock level, the focus is increasingly on execution, with investors differentiating between companies that can convert these tailwinds into stronger earnings, cash flow and shareholder value,” the report said.