GE2025: Ruling party’s strong showing signals flight to safety and a vote for policy continuity, say analysts

Analysts welcomed the results of Singapore’s general election (GE) held over the weekend, calling them a vote for political stability and policy continuity for investors.

Citi said in a report on Monday (May 5) that the strong mandate won by the ruling People’s Action Party (PAP) puts to rest any fears of a lurch towards populism and its attendant fiscal risks. It inspires confidence in policy continuity, which translates to better predictability and investor confidence in a pro-business approach, the bank added.

It also noted that historically, the Singapore dollar and the PAP vote share have a negative correlation. But the impact this time could be the opposite if the vote points to Singapore’s “safe-haven” appeal. Any “unwanted... appreciation pressures” would be partially offset by lower short-term interest rates, Citi said.

On the other hand, Singapore equities tend to have a positive correlation with the ruling party’s vote share.

Ahead of the market session on Monday, OCBC’s managing director of investment strategy Vasu Menon told The Business Times that the local bourse could “enjoy decent gains” from the PAP’s strong showing, Wall Street’s rally last Friday, and upbeat US jobs data. The Singapore bourse kicked off the week higher, but gave up most of its gains by the afternoon.

In Saturday’s GE, the PAP raised its overall share of votes to 65.57 per cent, up 4.33 percentage points from GE2020’s 61.24 per cent. The Workers’ Party (WP) kept its 10 existing seats in Hougang SMC and Aljunied and Sengkang GRCs, but failed to gain any ground in the other wards it contested. None of the other opposition parties won a seat.

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Regarding business-linked government moves, Citi believes the poll results are likely to cement continuity in current policies.

These include a continued inflow of foreign workers once the cyclical downturn has run its course, with the share of foreign workers continuing to rise even after the “watershed elections in 2011”.

While social expenditures will continue to grow, the government will resist pressure to use more investment returns as revenue.

DBS senior economist Chua Han Teng shares a positive view of the election. “PAP’s strong mandate will reassure investors of ongoing political stability and policy continuity. (There is) potential to enhance the already favourable business environment that will serve Singapore well over the coming years.”

He expects the PAP government to balance providing immediate economic support with long-term priorities of improving growth, as well as addressing rising social needs.

These include more targeted fiscal support for businesses and workers, complementing monetary policy easing this January and April, Chua said.

“Measures will likely prioritise local small and medium-sized enterprises with (fewer) resources and greater constraints, and especially those engaged in goods exports business, which will be particularly vulnerable to the direct and indirect impacts of US tariffs,” he added.

Maybank analysts said: “The margin of victory by the incumbent could reflect on the preference of the electorate for stability as the external environment becomes more challenging.”

OCBC’s Menon added: “A well-managed economy, run by a stable government, is often welcome news for investors, given the current uncertain global economic environment, and this should have at least some positive immediate benefits for the local bourse.”