Singapore’s FY26 budget increases development spending. It focuses on building national AI capabilities, supporting business funding, attracting high-quality capital, and providing targeted cost-of-living help. The government expects higher spending to be funded by stronger corporate tax revenue and rising net investment returns, while keeping public finances sustainable. The government has raised its 2026 growth forecast, pointing to strong momentum in late 2025. The outlook is also supported by continued activity and spending in advanced manufacturing, semiconductors, and AI-related work. Plans include creating a National AI Council. Prime Minister Lawrence Wong will chair it. The goal is to encourage wider use of AI technology, lift long-term potential growth, and help offset demographic pressures. The article says it was produced with the help of an AI tool and reviewed by an editor. The FY26 budget’s focus on growth and AI is a clear positive signal for Singapore-linked assets. The added government spending, together with strong late-2025 momentum, supports the upgraded outlook. The Straits Times Index (STI) has already reacted well, rising almost 4% since the start of January 2026. We view this as a reason to expect the Singapore dollar to strengthen in the near term. Singapore’s strong fiscal position and focus on high-growth sectors make its currency appealing versus currencies tied to weaker or less certain outlooks. This week, USD/SGD fell to 1.3250 and broke the 1.33 support level that held through much of Q4 2025. This suggests further downside may follow. For equity derivatives, the budget puts more attention on technology and advanced manufacturing. These sectors are a large part of Singapore’s economy and should benefit directly from new funding and AI initiatives. We should consider buying call options on the STI, or on specific ETFs that track these higher-growth areas, to benefit from expected earnings growth. In the past, clear and supportive fiscal policy has often been followed by lower market volatility. After the recovery budgets of 2021–2022, implied volatility on STI options trended down as policy direction became clearer. This pattern suggests volatility-selling strategies may become attractive, though we still need to watch for external shocks.

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