Singapore 2024 Year Recap | Industrials Take the Lead, Financials Prop Up the Market

Over the past two years, the Straits Times Index (STI) has outperformed many other markets in the Asia-Pacific region, hitting a new high not seen in 17 years. As of December 18, the Singapore Straits Times Index rose more than 16% in 2024. The excellent performance of the STI can be attributed to the market's high dividend yields and defensive characteristics, as well as the strong performance of banks in a high-interest-rate environment.

According to statistics, as of December 18, among Singapore's 11 major industries, 7 sectors have seen gains. Notably, the industrial sector has risen by 15.8% year-to-date. The energy and consumer staples sectors follow closely behind, with increases of 14.1% and 8.1%, respectively. In contrast, the health care sector has been the biggest decliner this year to date, dropping by more than 13.5%.

The Financial sector, carrying the most weight in the market, has witnessed a 3.5% rise since the start of the year. Financials, especially Banks, tend to perform better than other industries in a high-interest rate environment which allowed Banks to keep a high net interest margin. Singapore rates tend to move closely with US rates. As long as the US Federal Reserve's rate cut cycle is a shallow one, US and Singapore interest rates could stay at a level that is still high compared to historical levels. As a result, banks could continue to benefit from a "higher for longer" rate environment.