Singapore’s STI little changed in early trade on Monday after PAP win at GE2025

[SINGAPORE] Singapore shares were little changed in early trade the first trading day after the country’s elections wrapped up.

As at 9.28 am, the Straits Times Index (STI) opened 0.1 per cent or 3.36 points lower at 3,841.78 on Monday (May 5).

Across the broader market, gainers outnumbered losers 107 to 79 after 79.8 million securities worth S$133.9 million changed hands.

Local banking stocks were mostly trading in positive territory. DBS rose 0.4 per cent or S$0.18 to S$42.88. OCBC increased 0.1 per cent or S$0.01 to S$16.18. Meanwhile, UOB was 0.1 per cent or S$0.37 down at S$34.77.

On Saturday, Singaporeans went to the polls and gave the ruling People’s Action Party (PAP) an overall share of 65.57 per cent of the votes in GE20205 – a stronger show of support than the party’s 2020 results of 61.24 per cent. The de facto opposition party, Workers’ Party (WP), retained its existing seats, but made no gains.

Market watchers said the result was likely to have limited impact on the stock market, with the election result offering a welcome signal for investors who value political stability.

In a Monday report, Citi said PAP’s higher vote share marks a return to its traditional “safe-haven” appeal during uncertain times.

“The moderate main opposition, WP, successfully defended its 10 parliamentary seats, which should allay any potential concerns about a lurch towards populism and attendant fiscal risks,” said the bank.

Despite continued countercyclical accommodative macroeconomic policy mix regardless of the election results, the analysts noted that the stronger mandate secured by the ruling party would likely cement continuity of current government policies.

This includes a continued inflow of foreign workers once the cyclical downturn has run its course, with the share of foreign workers continuing to rise even after the “watershed elections in 2011”, the analysts said.

On fiscal policy, a stronger mandate in GE2025 could help the government resist pressure to use more investment returns as revenue.

Meanwhile, the share of social expenditures is likely to see continued growth, said the bank.

The analysts noted that in the past, the Singapore dollar’s exchange rate tended to move in opposition to the ruling party’s vote share.

“However, if the results of GE2025 are seen as reinforcing the Sing dollar’s safe-haven appeal impact on overall monetary conditions, unwanted Sing dollar appreciation pressures could be partly offset by lower short-term interest rates,” they said.

A stronger voter mandate means confidence on policy continuity, which translates to better predictability and investor confidence on a pro-business approach, the analysts noted.

This is on the back of a historical positive correlation between PAP’s vote share and equity market performance, with the exception of GE2011 elections.

They added: “While this may not directly change anything fundamentally from an earnings or growth standpoint for listed equities, the market and policy stability should help enforce its safe-haven status.”

Previously, OCBC’s managing director of investment strategy Vasu Menon told The Business Times that the local bourse could “enjoy decent gains” when markets open, buoyed by the ruling party’s strong showing in the weekend polls, Wall Street’s rally on Friday and upbeat US April jobs data.

“A well-managed economy, run by a stable government, is often welcome news for investors, given the current uncertain global economic environment, and this should have at least some positive immediate benefits for the local bourse,” he said.