Singapore stock benchmark heads for six-year high since June 2018 on earnings hopes

Singapore’s stocks are poised for a six-year high thanks to a revival in bank shares as optimism rises ahead of the upcoming earnings season.

The Straits Times Index climbed as much as 0.7% on Wednesday, set for the highest close since June 2018. Mapletree Pan Asia Commercial Trust and DBS Group Holdings Ltd. were among the biggest gainers on the gauge.

Banks have been a winner in the city-state’s market in recent weeks, with shares touching record highs, thanks to strong dividend expectations. Lenders are expected to post strong earnings thanks to higher interest rates.

DBS, Oversea-Chinese Banking Corp. and United Overseas Bank Ltd. are expected to report second quarter results early August.

The bank shares “will continue to take the market higher in the short term due to their positive fundamentals including return on equity and payouts,” said John Foo, founder of Valverde Investment Partners Pte.

Still, banks may face a reversal in fortunes once the Federal Reserve begins policy easing. Fed chairman Jerome Powell has remained careful not to offer a timeline for interest-rate cuts, though investors are now betting they will begin in September.

The “STI offers some of the best dividend yields in Asia,” said Nirgunan Tiruchelvam, an analyst at Aletheia Capital. “As rates fall, the STI will stand out as a beacon,” given that many of the companies provide regular income. They include the Real Estate Investment Trusts and Temasek Holdings Pte-linked firms.