INVESTING · Singapore Investing Glossary

Momentum Investing Singapore

Momentum investing is a strategy that involves buying assets that have been rising in price and selling (or shorting) those that have been falling, based on the empirical observation that recent price trends tend to persist over weeks to months. In Singapore’s SGX market, momentum strategies can be applied to individual stocks, sector ETFs, and REITs — though the relatively small and concentrated nature of SGX requires careful implementation.

This article is for informational purposes only and does not constitute financial advice. Always consult a licensed financial adviser before making investment decisions.

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What Is Momentum Investing?

Momentum investing rests on a well-documented market anomaly: securities that have performed well over the past 3–12 months tend to continue outperforming, while recent laggards tend to continue underperforming, over the subsequent 3–12 months. This persistence violates the efficient market hypothesis in its semi-strong form and has been documented in Singapore and other Asian markets.

The intuition behind momentum: when good news causes a stock to rise, investor psychology and fund flows cause other market participants to gradually discover and act on that news — creating a persistent trend. This is sometimes called the “momentum factor” in factor investing frameworks.

In Singapore, momentum is most visible during sector rotation cycles — for example, when S-REITs broadly underperformed in 2022–2023 as interest rates rose, and began recovering momentum in late 2024 as rates stabilised.

Momentum Strategies for Singapore Investors

There are several ways Singapore retail investors can implement momentum:

• Price momentum screens: Use the SGX stock screener to filter stocks with the highest 3-month or 6-month price returns. This is a basic momentum filter — buy the top performers, exclude the worst performers.
• Relative strength: Compare each stock’s performance against the STI (Straits Times Index) or its sector peers. Stocks with consistently better relative strength are momentum candidates.
• 52-week highs: Stocks making new 52-week highs have historically shown positive momentum. SGX daily reports list new highs and lows.
• Moving average crossovers: When a stock’s 50-day moving average crosses above its 200-day moving average (golden cross), this signals strengthening momentum. This is a popular technical signal among Singapore retail traders.

Combining Momentum with Fundamental Analysis

Pure momentum strategies can suffer from sudden reversals — buying stocks solely because they have risen is risky, especially in Singapore’s smaller market where a few large trades can move prices. Most experienced Singapore investors combine momentum signals with fundamental filters:

• Earnings momentum: Look for companies where analyst earnings estimates are being revised upward. Rising EPS estimates often drive price momentum.
• Revenue acceleration: Companies with accelerating revenue growth (quarter-over-quarter improvement) show fundamental momentum that can sustain price momentum.
• Sector tailwinds: Combine sector-level momentum with stock-level fundamentals. For example, if data centre REITs are in strong uptrend (sector momentum), also check occupancy, DPU growth, and gearing before buying.

For Singapore REIT investors, see our gearing ratio and DPU guides for fundamental checks to layer onto momentum signals.

Risks of Momentum Investing in Singapore

Momentum investing carries distinct risks that Singapore investors must understand:

• Momentum crashes: Momentum strategies can suffer sharp, rapid drawdowns during market stress. The global financial crisis (2008) and COVID-19 crash (March 2020) both caused severe momentum factor reversals on SGX.
• Low liquidity on SGX: Singapore’s market is relatively illiquid for small-caps. Momentum signals may be driven by thin volume — not genuine trend strength. Always check average daily trading volume before acting on momentum signals for smaller counters.
• Costs: Momentum strategies involve more frequent trading than buy-and-hold. Brokerage commissions (typically 0.25–0.28% per trade at most Singapore brokerages) and bid-ask spreads can erode returns significantly for retail investors.
• Overconcentration risk: In a small market like SGX, momentum strategies may concentrate your portfolio in a few hot sectors (e.g. data centres in 2024), creating sector risk.

Momentum vs Value Investing in Singapore

Momentum and value investing are often seen as opposites — value investors buy unloved, cheap stocks; momentum investors buy recent winners. Research suggests combining the two can produce superior risk-adjusted returns:

• Screen for stocks trading at attractive valuations (low P/B or P/E relative to peers)
• Among those, select only those showing positive price momentum (outperforming sector over 3–6 months)

This “cheap and improving” approach avoids value traps (cheap stocks that keep falling) while also avoiding overextended momentum plays. It is one of the core multi-factor approaches used by Singapore institutional managers like Nikko AM and Lion Global Investors in their systematic equity strategies.

Frequently Asked Questions

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