Trend shows PAP win tied to STI gains

Data from past polls show the index typically outperforms if the percentage of votes won by PAP is high, said DMG Research.

In a statement, the analyst noted that while there is no clear historical trend of the STI's performance over a one-month period post Polling Day based on the past five Ges,an analysis of the index's performance against the percentage of votes won by the People’s Action Party (PAP) show a “discernible positive relationship.”

In the 2001 GE, the STI rose by 11.9% for the one-month period post Polling Day following PAP's success in securing 75% of votes, the highest over the recent five GEs.

In contrast, PAP's failure to win more than 61% of votes-- its lowest over the past five GEs-- led to a 3.1% STI decline over the following month.

DMG Research said the upcoming polls present a trading opportunity both for investors who are banking on a PAP sweep and those who remain skeptical of the party.

“We believe the results for the coming GE will impact the STI over the next few weeks.

If one believes the PAP will win a higher percentage of votes, he should be buying into the current equity market weakness.... If one believes PAP will achieve a lower percentage of votes, then he  should be reducing his equity holdings,” DMG Research said.