Singapore stocks are trading at their highest level in almost a year and having lagged regional peers, analysts say the market now has the potential to gain the upper hand.
The benchmark Straits Times Index has climbed almost 12 percent since hitting its lowest level in more than a year in early February. Last Thursday, the market rose to its highest level in almost a year, boosted in part by merger and acquisition activity.
Last week, a unit of Chinese e-commerce giant Alibaba announced plans to buy a minority stake in Singapore Post for $249 million to help set up an global e-commerce logistics business. That news boosted SingPost shares to a record high.
"If you look at the ASEAN markets as a whole, they have actually done pretty well," said Audrey Goh, investment strategist at Standard Chartered Bank in Singapore, referring to the Association of Southeast Asian Nations.
"Singapore does have the potential to outperform, it is one of the higher-yielding markets," she added.
On a year-to-date comparison, Singapore's stock index is up about 3.4 percent. That leaves it behind double-digit gains in Southeast Asian peers Indonesia and the Philippines, and a rise of about 8 percent in Thailand. Neighboring Malaysia's stock index is up just 0.5 percent.
Morgan Stanley ASEAN strategist Hozefa Topiwalla recommends Singapore as his most-preferred ASEAN market given its defensive nature.
In a note published last week, analysts at Morgan Stanley said they have upgraded their position on Singapore stocks to overweight.