Singapore's equities market offers a good opportunity for investors in 2025, with a projected 4.1% dividend yield and high returns on equities (ROEs) of around 12.3%-12.4%.

Within the equities market, CGS International said investors must focus on three themes: high-yield, high-growth stocks, value-up plays, and interest rates and bond yields.

The expert expects large-cap stocks to yield 5.0%-5.7% in FY25F. Among these, banks will remain well-owned due to their upcoming full-year results and the possibility of special dividends.

CGS International expects investors to focus on stocks offering high yields above 5% and strong earnings growth. These include Hongkong Land Holdings, StarHub, Venture Corporation, and City Developments.

For investors with higher risk tolerance, CGS International cited growth stocks like Sea Limited, iFAST Corporation, Seatrium, SATS Limited, and Singapore Technologies Engineering.

Amongst small-cap companies that CGS International covers, the highest dividend-yielding stocks include $BRC Asia (BEC.SG)$, $PropNex (OYY.SG)$, $APAC Realty (CLN.SG)$, and $CSE Global (544.SG)$, with projected FY25F dividend yields ranging from 5.8% to 8.3%. Stocks offering high yields and above-market earnings growth include $CSE Global (544.SG)$, $Japfa (UD2.SG)$, and $PropNex (OYY.SG)$.

As Singapore works to enhance its stock market, CGS International expects investors to seek companies trading below book or market value but with strong fundamentals or growth potential.

Companies like Hongkong Land, which plans to align management's interests with shareholders through a new incentive plan, and Far East Orchard, engaging with investors to improve its market position, are taking steps to improve valuations.

According to 2 December Bloomberg data, 80 Singapore stocks with a market cap above US$200m were trading at or below 0.90x book value. Of these, 36 stocks (45%) had a market cap below US$500m, 20 stocks (25%) were between US$500m and US$1.0b, and the remaining 24 stocks (30%) had a market cap above US$1.0b.

By sector, 51% of stocks trading below book value were from property/REITs, and 10% from commodities. These cyclical sectors accounted for 61% of the stocks trading below book value.

Next year, CGS International advised investors to account for the risk of a steepening yield curve, as slower declines in long bond yields could cap equity valuation upside, particularly in the real estate investment trust (REIT) sector.

The expert foresees a 100bps Fed Fund rate cut in 2025F, whilst the market anticipates 75bps. Meanwhile, the 2-10-year bond yield curve has experienced slight inversion since December 2024.