Review: Singapore equities are recovering from last month’s Middle East conflict,
eking out a modest 0.6% gain in April. YTD26, it is up 5.7%. Banks were largely sidelined
ahead of results (Figure 1). The vibrant capital markets are expected to boost trading
and wealth management income. Cyclicals led the recovery as markets price in the
worst of the Middle East conflict is over (Figure 2). Transportation was the weakest
sector as energy prices remained elevated despite the apparent ceasefire (Figure 3).
Company-specific news was also a contributor to the weakness. Globally, the tech
sector was the strongest performer, led by Nasdaq (Figure 5).
Outlook: The US economy is relatively unscathed by this conflict, given its status as an
energy and food exporter. The surge in AI investments is also bolstering the economy.
Technology imports into the US are growing at a 55% YoY pace in 1Q26 (Figure 8). If
the prolonged conflict leads to NACHO (Not A Chance Hormuz Opens), the global
economy will be further disrupted. The conflict has resulted in an estimated 14mn
bopd decline in oil supply. Equilibrium is achieved by the fall in inventory and loss in
demand. Inventories are declining to cope with supply cuts, such as US crude
commercial inventories (Figure 9) and strategic reserves (Figure 10). Singapore’s
economy remains robust with exports soaring, led by an 81% spike in semiconductors
in 1Q26 (Figure 11). New home sales in Singapore declined 40% YoY in 1Q26 (Figure
12). However, the weakness stems from a similar 41% collapse in new launches.
Underlying demand is robust, with two recent launches virtually sold out at 72% and
99% sales over the opening weekend.
Recommendation: There are potentially two major Godzilla cycles this year. The
global semiconductor positive sales cycle (on a YoY basis) averages 30 months. The
current cycle is 24 months, while the longest is 72 months (Figure 13). Fanning the
optimism is demand, with soaring revenue growth from large language models (e.g.,
Anthropic, OpenAI), a 70% jump in hyperscaler CapEx (Figure 14), SpaceX’s planned
US$115bn Terafab (for FSD, space data centres, and robots), and upcoming IPOs in
2H26 to fund this CapEx. Expectations are a monster, or Godzilla El Niño could occur
by year-end. Sea surface temperature in the Central Pacific is rising rapidly.
Temperatures above 2 degrees Celsius are considered a very strong El Niño. There is
a 25% chance of this occurring and peaking in late 2026, according to the NOAA
Climate Prediction Centre. The prior severe El Niños were in 1998 and 2016, when
CPO production in Malaysia dropped 8% and 13%, respectively. Palm oil prices surged
71% and 21% in 1998 and 2016, respectively (Figure 15). The extreme heat and
dryness cause the trees to reduce flowering and fruiting to save water.
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Paul has 20 years of experience as a fund manager and sell-side analyst. During his time as fund manager, he has managed multiple funds and mandates including capital guaranteed, dividend income, renewable energy, single country and regionally focused funds.
He graduated from Monash University and had completed both his Chartered Financial Analyst and Australian CPA programme.
