Singapore FY25 Budget Preview and Listed Companies Analysis
Singapore FY25 Budget Preview and Listed Companies Analysis
Broker Name: CGS International Securities
Date of Report: February 10, 2025
Overview of the FY25 Budget
The FY25 Budget, set to be presented by Prime Minister Lawrence Wong on February 18, 2025, is expected to be broadly expansionary. With a focus on addressing the rising cost of living and enhancing retirement adequacy, the budget coincides with Singapore’s 60th year of independence. Key themes include economic competitiveness, retirement readiness, and providing support across various life stages.
Key Themes and Fiscal Outlook
The FY25 Budget builds on the seven themes from FY24, emphasizing learning, job respect, family support, aging well, empowering the needy, investing in the future, and national unity. The fiscal outlook for FY25 projects a balance at 0% of GDP, signaling a broadly neutral budget compared to FY24’s anticipated surplus of 0.1% of GDP.
Retirement Adequacy and CPF Investment Scheme
The government is expected to reinforce previous announcements on retirement and re-employment ages. Notably, the minimum retirement age will rise to 64 in 2026 and the re-employment age to 69 in 2025. Discussions around enhancing the Central Provident Fund (CPF) investment scheme are also anticipated, with options for greater returns through diversified asset classes like equities and ETFs.
Stock Implications Across Key Sectors
The FY25 Budget’s focus on cash handouts, cost of living, and retirement adequacy is expected to impact various listed companies positively. Detailed analyses of the affected companies and sectors are provided below:
Sheng Siong (SSG) and DFI Retail
Supermarket operators like Sheng Siong and DFI Retail are poised to benefit from potential cash handouts to Singaporeans. As cost-of-living measures drive consumer spending, these companies could see increased footfall and revenue growth.
Real Estate Investment Trusts (REITs)
REITs are highlighted as key beneficiaries due to their high dividend yields, averaging 6.3% for FY25F. Enhanced liquidity from CPF investments in diversified asset classes could further drive investor interest in this sector.
Telecommunications (ST) and Banks (DBS)
High-yielding stocks like telecommunications companies (e.g., SingTel) and banks (e.g., DBS) stand to gain from increased liquidity flows. These sectors offer stable, long-term returns that align with retirement investment needs.
Top Dividend Yield Stocks for FY25
Among the top 20 dividend yield stocks, notable mentions include:
- Aztech: 11.6% yield
- SASSR: 9.5% yield
- Elite: 9.3% yield
- DBS: 6.9% yield
- ST: 5.8% yield
Dividend yield plays, particularly in REITs and financial services, remain a compelling choice for long-term investors.
Detailed Analysis of CPF Trends and Investment Scheme Options
The CPF account balances have shown consistent growth in recent years. Enhanced investment scheme options could include diversified instruments like equities and ETFs, providing Singaporeans with more choices for secure and higher returns. Current CPF investments are primarily directed to Special Singapore Government Securities (SSGS).
Recommendations and Sector Ratings
The report offers the following recommendations:
- Add: Stocks with expected returns exceeding 10% over the next 12 months.
- Hold: Stocks with expected returns between 0% and 10% over the next 12 months.
- Reduce: Stocks with expected returns below 0% over the next 12 months.
Sector ratings are categorized as Overweight, Neutral, or Underweight, based on market cap-weighted recommendations.
Conclusion
The FY25 Budget underscores Singapore’s commitment to addressing economic challenges, supporting citizens at every life stage, and enhancing retirement adequacy. Investors should focus on high-yielding stocks and sectors poised to benefit from the budget’s measures. With diversified CPF investment options on the horizon, the Singapore equities market could see a significant boost in liquidity and investor confidence.
