Singapore’s retail sales rose 6.1% month on month in January. This follows a -5.4% month on month change in the previous period.
The latest figure shows a shift from contraction to growth. The change equals an 11.5 percentage point move between the two readings.
We are seeing a significant rebound in consumer spending with the January retail sales print. This sharp reversal from the contraction we saw at the end of 2025 suggests renewed strength in the domestic economy. This kind of positive surprise should put upward pressure on Singapore-linked assets.
This data reinforces the case for a stronger Singapore Dollar, especially as the Monetary Authority of Singapore has maintained its policy of gradual appreciation to combat inflation. We saw the SGD hold its ground against the US dollar for most of 2025, and this domestic strength makes a case for buying SGD call options or selling USD/SGD futures. The latest data from February 2026 showed core inflation remaining elevated at 3.5%, giving the MAS little reason to soften its stance.
For equity derivatives, this points towards being long the Straits Times Index (STI). The strength is particularly good for consumer discretionary and banking stocks, which benefit directly from higher transaction volumes. We should consider buying call options on the STI or on baskets of retail-focused companies, anticipating that this momentum will carry through the first quarter.
However, we must consider that the January surge was likely boosted by spending ahead of the Lunar New Year. We need to watch the February data closely to confirm if this is a sustainable trend or just a seasonal blip. Looking back at 2025, we saw a similar, though less pronounced, festive spending boost that moderated by March.
Given the uncertainty, an increase in implied volatility on the STI is expected. This presents an opportunity to structure trades that benefit from price movement, such as long straddles, if we believe the market is underpricing the potential for a larger move. Alternatively, for those who are more cautious, now is a good time to buy puts on the index as a hedge against a potential pullback if the global economic slowdown starts to impact Singapore more deeply.
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