(Bloomberg) -- Singapore’s stock market edged closer to an all-time high on Thursday, after a prolonged rally in bank shares.
The benchmark Straits Times Index rose as much as 1.1% during the day before paring its gains to finish up 0.6%. That put the market just shy of the record closing price set in October 2007.
The recent rally has been driven by a rise in Singapore banking stocks, with analysts highlighting the ability of lenders to maintain profitability despite expectations of lower interest rates. Banks’ stable dividend payouts are also enticing investors.
The STI has surged about 18% so far this year, making it the best-performing stock market in Southeast Asia.
Although banks’ net interest margins are narrowing, the pace “remains gradual, which along with steady loan growth and deposit cost management, helped to mitigate some of the interest rate headwinds,” said Jun Rong Yeap, a market strategist at IG Asia Pte.
The Monetary Authority of Singapore kept its policy unchanged in October, its last decision for 2024. But expectations are growing that the central bank will eventually join a global wave of easing.
The bulk of the optimism may lie in the ability of Singapore’s giant banks to generate non-interest income, according to Yeap. “The momentum in wealth management activities continues to support overall performance, as the banks continue to enjoy strong inflows from the region,” he said.
The Singapore government’s push to boost liquidity in the stock market has also helped sentiment. A newly formed task force will submit an action plan by next summer, and will consider “initiatives to improve the vibrancy” of the stock market, and study ways “to galvanize greater private sector participation” in the effort, the city-state’s financial regulator said in August.
Morgan Stanley analysts recently predicted that 2025 will be a “fruitful” year for Singapore stocks, in part because of the push for market reforms. Goldman Sachs Group Inc. is similarly upbeat on the market, upgrading it last month on the view that earnings growth in key sectors will offset concerns the economy is slowing.
(Updates with closing prices.)