Singapore’s inflation edged higher. Here’s why we remain constructive on Singapore equities.

• Core inflation rose to 2.0% YoY in July (June: 1.6%), its firmest reading this year, as MAS had projected it would step up from July onward.
• Headline CPI climbed to 2.2% YoY (June: 1.9%), the highest since September 2024, though it undershot the roughly 2.3–2.4% consensus economists had expected.
• The electricity tariff hike we flagged in June has arrived: SP Group raised household electricity tariffs by 17.0% quarter-on-quarter from 1 July, lifting Utilities & Other Fuels inflation to +6.1% YoY.
• MAS tightened policy for the second time this year, in April and again in July, slightly increasing the rate of SGD appreciation to keep imported inflation in check.
• We maintain our constructive view on Singapore equities, with an STI target of 5,987 by end-2028 and an approximately 4.3% annual dividend yield.

Back in June, we described Singapore's inflation picture as having two layers: a cooling core layer of everyday prices, and a second, energy-linked layer running hot on the back of the Middle East conflict. In July, those two layers moved together for the first time this year. Core inflation firmed to 2.0% YoY as higher import costs broadened beyond fuel into food and retail goods, while the energy-linked layer delivered its most concrete shock yet: the quarterly electricity tariff revision that we had been watching for since June finally hit household bills.

The tariff mechanism works with a lag, since it is set using average natural gas prices from the first two and a half months of the preceding quarter. The elevated fuel prices between April and mid-June, a period when the Middle East conflict kept global energy costs high, meant Singapore households effectively knew the July tariff would jump before it was announced.

SP Group's overall electricity tariff (before GST) rose 17.0% or 4.64 cents per kWh for households from 1 July, taking the average HDB four-room flat's monthly bill up by SGD 17.14. This single adjustment explains most of the acceleration in Housing & Utilities inflation, from 0.3% to 1.3% YoY, and is the clearest concrete evidence yet of energy costs feeding into the CPI basket.

Table 1: Singapore CPI — July 2026 Snapshot

Indicator	Jul 2026	Jun 2026	Comments
CPI-All Items (YoY)	2.2%	1.9%	Highest reading since September 2024. Broad-based acceleration led by transport and utilities, alongside continued strength in food and healthcare.
MAS Core Inflation (YoY)	2.0%	1.6%	Stepped up as flagged by MAS, reflecting broader pass-through of imported energy costs into food, retail and other goods.
Transport (YoY)	7.9%	7.5%	Private transport costs continued to climb on elevated petrol and COE-related pricing.
Housing & Utilities (YoY)	1.3%	0.3%	Utilities & Other Fuels alone rose 6.1% YoY as the anticipated 3Q26 electricity tariff hike (+17.0% QoQ) took effect from 1 July.
Food (YoY)	2.2%	2.1%	Continued its gradual climb, led by fish & seafood and non-alcoholic beverages.
Health (YoY)	3.3%	3.1%	Driven largely by health insurance premiums, up 8.6% YoY.
Full-year 2026 forecast (Core / All Items)	1.5–2.5%	1.5–2.5%	Unchanged. MAS expects Core Inflation to step up from July and stay elevated into early 2027, before gradually easing from around mid-2027.
Source: MAS, MTI, Department of Statistics Singapore. Singapore Consumer Price Index (2024 as Base Year), July 2026, published 24 Aug 2026; MAS Monetary Policy Statement, 27 Jul 2026; SP Group, Electricity Tariff Revision for 1 Jul to 30 Sep 2026.

Related article: Singapore inflation and monetary policy: Stronger SGD to absorb imported oil price shock

MAS has tightened for a second time in July

Unlike most central banks, MAS manages inflation through the exchange rate rather than interest rates, steering the pace at which the Singapore dollar (SGD) is allowed to appreciate against a trade-weighted basket of currencies, the S$NEER. Having already tightened in April, MAS opted to increase the rate of S$NEER appreciation again in July, though by a smaller step than in April. The width and centre of the policy band were left unchanged both times.

The move came against a backdrop of surprisingly resilient growth: Singapore's economy expanded 5.9% YoY in 2Q26, well above expectations, driven by strong AI-related technology and trade activity that more than offset the disruption to oil-related sectors. MAS now expects the economy's positive output gap to widen further in 2026.

This stronger growth outlook was subsequently reinforced by MTI’s 11 August upgrade of its full-year 2026 GDP growth forecast to 4.5–5.5%, from 2.0–4.0% previously. The upgrade reflected the stronger-than-expected first-half performance and an improved outlook, supported by accelerating global AI-related capex.

Despite the stronger growth outlook, MAS kept its full-year 2026 forecasts for both MAS Core Inflation and CPI-All Items unchanged at 1.5–2.5%. However, it flagged that core inflation is likely to remain elevated into early 2027 before gradually easing from around mid-2027.

Related article: MAS' July Tightening: A firmer policy signal, an unchanged investment case

What to watch: Oct's electricity tariff revision and the risk of a fresh energy spike

The next key data point will be the fourth-quarter 2026 electricity tariff revision. SP Group has noted that, if conditions in the Middle East improve, global fuel prices and the Q4 tariff could ease from current levels, while further escalation would put upward pressure on both.

MAS has identified this as a key upside risk to its inflation outlook, cautioning that fuel reserves have already been drawn down significantly and that renewed supply disruptions could trigger another sharp rise in oil prices. Separately, moderating nominal wage growth, coupled with the possibility of more cautious household spending as the cost of living rises, should help contain broader inflationary pressures.

What this means for investors

The inflation and monetary policy picture in Singapore remain manageable. While prices are higher, the SGD is being used as a steady, calibrated shock absorber. The main risk, energy pass-through, is well-flagged and quantifiable. This is not an inflation crisis; it is a contained adjustment to an external shock. Separately, this also reinforces the SGD’s role as a wealth preservation currency and indirectly supports continued capital inflows into SGD-denominated assets. This could enhance Singapore’s appeal as a global wealth management hub and thereby, benefit the banks.

For Singapore equities, a stable price environment and a gradually firming SGD are broadly supportive. A stronger currency benefits companies that rely on imported inputs priced in weaker foreign currencies by reducing their input costs. Combined with Singapore's strong 2Q26 GDP growth of 5.9% YoY and the ongoing AI investment tailwind, key beneficiaries include semiconductor stocks and data centre S-REITs.

Related article: SG’s 2026 growth forecast upgraded to 4.5–5.5%: AI upcycle lifts outlook, positive view maintained

Meanwhile, despite MAS tightening through the exchange rate rather than interest rates, global borrowing costs are expected to remain elevated as inflationary pressures persist, leaving S-REITs exposed to potential cap rate expansion and near-term refinancing risks. Investors should approach S-REITs selectively, focusing on names that (1) balance sheets are healthy with lower gearing and predominantly fixed-rate debt; and (2) the underlying sub-sector has structural demand drivers that are independent of the rate cycle. We see greater resilience in names such as CapitaLand Ascendas REIT (SGX: A17U), CapitaLand Integrated Commercial Trust (SGX: C38U), Keppel DC REIT (SGX: AJBU), Digital Core REIT (SGX: DCRU) and Stoneweg Europe Stapled Trust (SGX: SEB).

Related article: S-REITs: Selectivity remains key as 1H26 earnings confirm an uneven recovery

The case for Singapore equities remains intact

The investment case rests on multiple pillars.

First, the banking sector continues to anchor index income while its earnings quality improves. Singapore banks' net interest margins are more sensitive to SORA-linked rate cycles than to currency policy, leaving them broadly unaffected by the MAS move. Looking at the banks’ recent 1H26 results, all three local banks posted strong wealth franchise growth: DBS's wealth fees rose 33% YoY with assets under management (AUM) surpassing SGD 500 billion, OCBC's wealth fees grew 27% alongside a record SGD 350 billion in AUM, and UOB's wealth fees rose 16% alongside high-net-worth AUM at SGD 204 billion. We expect safe-haven flows into Singapore to persist amidst ongoing geopolitical uncertainty, supporting continued momentum in this segment across the sector.

Among the three, DBS (SGX: D05) remains our top pick, offering the strongest combination of earnings quality, capital returns and an annualised forward yield of around 4.6% over the next three years.

Related article: Fee-led growth, compelling total returns: Singapore banks after 1H26

Second, industrials have become the STI's primary earnings growth driver as consensus earnings growth for 2026 (30.0%) dwarfed other major sectors like the banks (7.1%) and REITs (4.1%). Industrials have overtaken S-REITs to become the STI's second-largest sector weighting, led by ST Engineering and Yangzijiang Shipbuilding, both of which offer multi-year earnings visibility through record order books of SGD 35.7 billion and USD 22.4 billion respectively (as of 30 June 2026).

Figure 1: Industrials lead STI earnings growth in 2026 and beyond.

Related article: Industrials cement their role as the STI's earnings growth engine

Third, beyond these heavyweights, Singapore's integration into the global AI semiconductor supply chain is showing through in the trade data: four consecutive months of NODX growth above 20% was driven by the growth in electronic exports tied to accelerating hyperscaler AI infrastructure spending. Some beneficiaries in this trend include SGX-listed names like AEM Holdings, UMS Integration and Frencken.

Related article: Singapore’s July NODX holds above 20%: Structural upcycle gains staying power

Fourth, ongoing capital market revitalisation is broadening participation and depth. SGX's SDAV hit SGD 2.1 billion for the full year ended June 2026 (+72.0% YoY) while small and mid-cap (SMID) trading activity strengthened across three consecutive half-year periods. Close to 30 new listings are expected in 2026, and the upcoming SGX-NASDAQ dual-listing bridge could accelerate this further, potentially diversifying the index beyond its historically financials- and real estate-heavy composition toward higher-multiple "new economy" names. Longer-term, the CPF Lifecycle Investment Scheme, announced at Budget 2026 for a 2028 launch, could direct up to SGD 9 billion annually into Singapore equities — a structurally significant new source of domestic liquidity.

We maintain our STI target of 5,987 by end-2028, alongside an average dividend yield of approximately 4.3% till 2028, reflecting a total return of 18.2%. For diversified exposure to Singapore’s structural growth story, we continue to recommend the Amova Singapore STI ETF (SGX: G3B) and the iFAST-Amova Singapore Equity Fund (higher small and mid-cap exposure).

Related article: Singapore Outlook 2H26: Yield, growth and revitalisation in one market

Related article: Fund Spotlight: A National Day present? The iFAST-Amova Singapore Equity Fund is up 54% LTM*.

Declaration

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report, including all investment theses, ratings, price targets and conclusions, has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.