Singapore can deliver and thrive in a fragmented global economy: Morgan Stanley analysts

Straits Times

5 days ago

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The analysts say Singapore has a proven track record of adapting to a changing global economic environment.
SINGAPORE - As investors look in bewilderment at the fast-deteriorating global economic landscape under US President Donald Trump's onslaught on globalisation, some analysts are looking to Singapore as one of the few safe havens worldwide.
One of these analysts is Mr Derrick Kam, a Singapore-based Asia economist at US investment bank Morgan Stanley who believes the Republic is one of the few that offers more visibility on growth potential, political stability and governance quality.
He believes that Singapore has a proven track record of making policies needed to adapt to a changing global economic environment.
'Where Singapore excels is sort of being able to spot these global trends and try to navigate through them... and then get ahead of them,' he said in an interview with The Straits Times, along with the bank's head of Asean research Nick Lord.
Both the analysts recently co-authored a research report, Singapore At 60: Unlocking Wealth Creation, which tells investors that 'now is the time to build exposure to this dynamic and enterprising market'. The report references post-independence Singapore turning 60 in 2025.
The report highlights the various initiatives Singapore has launched in recent years – to reinforce its hub industries and implement emerging technologies such as artificial intelligence (AI) to boost productivity – which could see its household net assets almost doubling to reach US$4 trillion (S$5.13 trillion) by 2030.
Morgan Stanley sees the surge in household net assets as a tangible sign of real wealth creation – the process of growing assets and financial resources over time to achieve financial security and independence. The bank believes that wealth creation will be an essential part of the process by which developed economies such as Singapore will support their populations and mitigate risks inherent in a multipolar world, with an ageing population, changing patterns of energy production and consumption, and spread of new technologies.
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'The next step forward, we believe, will be wealth creation – building upon Singapore's established brand and economic success to further grow the country's capital and global financial standing,' the Morgan Stanley analysts said in the report.
The report highlights prospects of the Singapore stock market after the launch earlier in 2025 of a series of measures by the Equities Market Review Group, established by the Monetary Authority of Singapore.
Morgan Stanley believes the market reforms – including a
$5 billion Equity Market Development Programme announced in February – could drive up return on equities and other market multiples and lead to a doubling of stock market capitalisation by 2030.
On hub industries, Morgan Stanley expects Singapore to reinforce its energy hub by also becoming a major trading centre for liquefied natural gas and carbon trading as the world moves from fossil fuels to renewables.
Already home to 400 global traders that transact 20 per cent of the world's energy and metals trade, Singapore could see services related to carbon trading alone generate as much as US$5.6 billion in gross value to its economy by 2050, according to the Economic Development Board's estimates.
Singapore is also the world's third-largest foreign exchange (FX) trading hub after London and New York, and the biggest in the Asia-Pacific. Almost US$1 trillion of FX is traded in Singapore every day.
Morgan Stanley expects that as Asian currencies take a larger share of daily global FX trade, this would make Singapore a more crucial currency trading centre, even if it does not surpass London or New York.
The bank believes that Singapore can become a more significant transport and tourism hub as well, with airport capacity expansion projects and technology enhancements supporting its long-term growth goals.
The Singapore Tourism Board's 2040 road map
targets tourism receipts reaching $50 billion . Changi Airport plans to invest $3 billion to improve services over the next six years. It will also start the construction of Terminal 5 and open it to the public in the mid-2030s.
Finally, Singapore – along with Japan and Malaysia – is likely to get a disproportionate amount of investments for new data centres and generative AI investments by the likes of Amazon Web Services, Microsoft, GDS and other regional and global hyperscalers.
Singapore has 26 subsea cables landing across three sites – one of the highest in Asia – and its domestic infrastructure is set to be upgraded to support 10 gigabits-per-second broadband speeds within the next five years.
'We believe strengthening its leadership position in key hub industries and continuing to adopt technological advancements will yield strong productivity gains for Singapore,' Mr Kam said in the interview.
He estimates that AI adoption can potentially help Singapore sustain medium-term gross domestic product growth of around 3 per cent, which would keep Singapore as one of the fastest-growing developed economies in the world.
The Morgan Stanley analysts do recognise the risks that can hinder Singapore's progress on these initiatives, but they believe its proactive policymaking will keep it a step ahead of others.
The Singapore Government is trying to be as proactive as it can be.
Soon after the April 2 launch of Mr Trump's reciprocal tariff policy, the Republic
set up the Singapore Economic Resilience Taskforce to help businesses and workers navigate the immediate uncertainties arising from the US tariffs and related global developments.
On Aug 4, it
launched an Economic Strategy Review (ESR) to help ensure Singapore thrives in the new global economic landscape.
The ESR comprises five committees, each co-chaired by two political office-holders who will be joined by private sector, union and other stakeholders.
The committees will engage widely with businesses and workers and other stakeholders and publish their recommendations by mid-2026.
Most analysts believe similar initiatives helped the country manage crises in the past, including the more recent Covid-19-induced downturn.
Mr Lord said: 'So the question is: Can Singapore adapt more successfully than others? And the track record would suggest it probably can.'