💰STI Hits All-Time High: Top 10 Q1 SGX Winners & Q2 2025 Outlook

In the past Q1 of 2025,The $Straits Times Index(STI.SI)$ has just crossed a major milestone, hitting an all-time high of 4,005 on 27 March 2025.

This new record surpasses its previous peak from October 2023, and even the high it reached way back in 2007 before the Global Financial Crisis.

What makes this climb even more noteworthy is the context: while the US market continues to struggle with volatility — partly due to ongoing trade tensions and tariff concerns — the $Straits Times Index(STI.SI)$ has quietly pushed its way higher.

You may also be interested in the top 10 best-performing stocks on the $SGX(S68.SI)$ in Q1 2025:

$SEMBCORP INDUSTRIES LTD(U96.SI)$ , $Wilmar Intl(F34.SI)$ , $HongkongLand USD(H78.SI)$ , $STI ETF(ES3.SI)$ ; $DBS Group Holdings(D05.SI)$ ; $SIA(C6L.SI)$ ; $CapitaLandInvest(9CI.SI)$ ; $CapLand Ascott T(HMN.SI)$ $DFIRG USD(D01.SI)$ and $SGX(S68.SI)$ .

1. What’s driving this resilience? What’s Behind the Rally?

Let’s take a closer look. The STI’s Rally Is (Still) All About the Banks.

The primary driver behind this rally is the strong performance of Singapore’s three major banks: $DBS Group Holdings(D05.SI)$ , $ocbc bank(O39.SI)$ , and $UOB(U11.SI)$ . These banks account for over 54% of the STI’s total weighting.

Performance of the Big Three Banks

$DBS Group Holdings(D05.SI)$: DBS is Singapore’s largest bank by market capitalisation. For the first nine months of 2024, its total income rose 11% year on year to S$16.8 billion, with both net interest and non-interest income showing solid growth. The bank’s net profit hit a record S$8.8 billion, up 12% year on year.
$ocbc bank(O39.SI)$ : OCBC delivered a record net profit of S$7.6 billion for 2024, up 8.1% year on year. While net interest income rose just 1%, non-interest income jumped 22%, and loan growth hit 7.6%.
$UOB(U11.SI)$ : UOB’s Q4 2024 net profit increased 9% year on year to S$1.52 billion. Despite a slight dip in net interest margin to 2.00%, loan growth and higher fee income supported the bank’s results.

Factors Supporting the Banks’ Performance

Strong Earnings and Loan Growth: All three banks have seen robust loan book expansion and high asset quality, indicating resilience in the global economy.
Dividends and Share Buybacks: The banks have been rewarding shareholders with rising dividends and share buyback plans, reinforcing their commitment to capital returns.
Interest Rate Environment: Elevated interest rates have supported healthy net interest margins, allowing the banks to sustain strong profitability.
Investor Sentiment: Amid global uncertainty, investors have rotated into Singapore’s banking sector, attracted by the banks’ strong balance sheets and steady dividends.

Broader Implications

The $Straits Times Index(STI.SI)$ ’s new high is largely driven by these three banks, highlighting the importance of understanding the index’s composition and the fundamentals of its major constituents. While the STI’s performance is notable, it also underscores the need for investors to focus on the underlying drivers of the market, rather than just the headline index value.

2. $Straits Times Index(STI.SI)$ Q2 2025 Outlook

The $Straits Times Index(STI.SI)$ has shown strong performance in Q1 2025, rising by 4.86% and hitting an all-time high. However, the outlook for Q2 2025 is more cautious due to several factors:

Earnings Growth Slowdown: Overall STI market earnings growth is expected to slow to 3.4% in 2025, down from 12.4% in 2024. This is partly due to flattish earnings growth expectations for the index-heavyweight banks, as higher loan and fee income growth offset the impact of lower net interest margins (NIMs) amid a Fed rate cut.
Economic Uncertainty: Economic data points to potentially weaker consumers, stickier inflation, and renewed recession fears. This has led to a cautious outlook for equity markets, which are seen as expensive and not reflecting the current uncertainties.
Interest Rate Environment: The US Federal Reserve's interest rate policy remains a key factor. While rates are expected to remain relatively stable, any changes could impact the STI's performance.
Sector Performance: Despite the strong performance of the banking sector in Q1, other sectors such as ST Engineering and Sembcorp Industries also contributed to the overall STI performance. However, the banking sector's weightage in the index has increased to over 50%, making the STI more reliant on their performance.
Market Sentiment and Policy Initiatives: The Singapore government's efforts to revitalize the equities market and initiatives like the Johor-Singapore Special Economic Zone could provide some uplift in sentiment. However, the impact of these measures in Q2 remains to be seen.

3. Conclusion

While the $Straits Times Index(STI.SI)$ achieved notable gains in Q1 2025, the outlook for Q2 is more balanced and cautious. Investors should be mindful of the potential slowdown in earnings growth, economic uncertainties, and the heavy reliance on the banking sector. The STI's performance in Q2 will likely be influenced by global economic conditions, interest rate policies, and the ability of key sectors to sustain their growth momentum.

A tool to boost your purchasing power and trading ideas with CashBoost!

Open a CBA today and enjoy access to a trading limit of up to SGD 20,000 with upcoming 0-commission, unlimited trading on SG, HK, and US stocks, as well as ETFs. Find out more here.