Singapore stocks hit record high as Rupiah weakens before policy meeting

[SINGAPORE] The global market landscape saw an eventful turn on February 19, 2025, as Singapore stocks reached new heights and the Indonesian rupiah faced significant pressure ahead of the Bank of Indonesia’s crucial policy meeting. With upbeat earnings reports, robust government measures, and cautious investor sentiment, Asian markets experienced notable movements.

Singapore Stocks Reach Record High

On February 19, the Singapore benchmark stock index soared by 0.6%, reaching a record peak of 3,949.65 points. This rise marks a remarkable 4% gain for the year, fueled by solid performances from key players such as United Overseas Bank (UOB). The banking giant reported a 9% increase in quarterly profit and announced an impressive $2 billion special dividend and a share buyback package. This move undoubtedly instilled investor confidence, pushing Singapore stocks to new all-time highs.

In addition to UOB’s performance, Singapore's government unveiled a comprehensive 2025 budget aimed at providing significant support to consumers. The newly announced package included vouchers, tax rebates, and cash handouts, which further bolstered optimism in the market. Analysts have taken notice of these positive economic measures. JP Morgan, for example, raised its rating for Singapore stocks to "overweight," citing the city-state's relatively inexpensive valuations, low market volatility compared to regional peers, and government-driven efforts to support the local stock market.

The Role of UOB and the Budget Announcement

UOB’s positive financial results played a central role in driving Singapore’s stock market performance. The bank’s strong earnings were paired with shareholder-friendly measures, notably the special dividend and share buybacks. These initiatives are likely to be seen as a sign of financial strength and long-term stability for the bank, contributing to its overall positive impact on the broader market.

Moreover, the 2025 budget unveiled by Singapore’s government included several consumer-friendly policies aimed at easing economic pressures for residents. These included direct handouts and measures designed to address cost-of-living concerns. The government’s proactive stance in implementing these policies could be a key factor in the market's resilience amid broader global economic uncertainties.

JP Morgan’s Optimism for Singapore Stocks

Analysts at JP Morgan have expressed renewed optimism for Singapore's equity market. Their upgraded "overweight" rating is grounded in the country’s favorable financial conditions, which include its current low market volatility and reasonable stock valuations. These factors, combined with Singapore's prudent economic policies, offer a stabilizing effect on the stock market, especially in comparison to other regional markets.

The Rupiah Struggles Ahead of Bank Indonesia’s Policy Meeting

Meanwhile, the Indonesian rupiah experienced a decline, falling by as much as 0.6%. This drop marked its worst session since February 3, as traders exercised caution ahead of the Bank of Indonesia’s policy meeting. Market expectations are that the central bank will pause its rate easing cycle, a decision that has created uncertainty for the currency. The rupiah, which underperformed in 2024, has already fallen over 1.5% this year. As a result, stocks in Jakarta slipped 0.5%, snapping a three-day rally.

The Indonesian rupiah’s struggle highlights the broader challenges facing emerging market currencies. As a key regional player, the rupiah’s performance has significant implications for market sentiment. Its decline has drawn attention from investors, especially as the currency was already the worst-performing in the region for 2024. Furthermore, with global economic pressures like tariff concerns and geopolitical tensions, currencies like the rupiah remain vulnerable to fluctuations.

The Dollar Index and Asian Currencies

Amidst the fluctuations in the rupiah, the U.S. dollar maintained a relatively firm position. The dollar index, which tracks the value of the greenback against a basket of major currencies, was mostly range-bound. Investors are remaining cautious, particularly with concerns over potential tariffs and ongoing geopolitical tensions, such as those related to the Russia-Ukraine conflict. These external factors continue to create an atmosphere of uncertainty that keeps regional currencies under pressure.

Regional Market Performance

In addition to Singapore, other Asian stock markets saw mixed performances. Stocks in South Korea surged by 2.1%, driven by a strong rally in semiconductor stocks, with companies like Samsung Electronics and SK Hynix showing notable gains. This upward trend is on track to extend to a seventh consecutive session, highlighting the resilience of certain sectors in Asia.

Meanwhile, the Philippine stock market rose by 0.8%, reaching its highest level in over a week. On the other hand, markets in Thailand and Malaysia showed little movement, trading flat as investors awaited further direction from the policy meeting in Indonesia.

Market Outlook: What Lies Ahead?

Looking ahead, the market landscape remains influenced by both regional and global factors. Singapore’s economic resilience, demonstrated by the strong stock market performance and government support measures, contrasts with the challenges facing the rupiah and other emerging market currencies. While Singapore stocks are likely to continue benefitting from favorable economic conditions, the outlook for the rupiah remains uncertain as market participants await the Bank of Indonesia’s decision on interest rates.

The global environment also poses risks for market stability, with concerns over tariffs and geopolitical tensions weighing on investor sentiment. However, for now, Singapore’s stock market appears well-positioned to maintain its upward trajectory, thanks to its solid economic fundamentals and favorable policy environment.

February 19, 2025, marked a milestone for Singapore’s stock market, as it hit a record high driven by strong earnings and supportive government policies. Meanwhile, the Indonesian rupiah faced downward pressure ahead of a key central bank policy decision, highlighting the challenges facing emerging market currencies. As market participants digest these developments, attention will turn to upcoming economic reports and policy decisions that will shape the trajectory of regional markets in the coming months.