JPMorgan Chase & Co. has upgraded Singapore stocks to overweight, citing government support to the market, high dividend yields, and fiscal room to cushion the impact of an external slowdown.

“We believe the household and business supports should keep economic activities strong, whilst investment into innovation and boosting the equities market would open up new opportunities for growth,” strategists including Khoi Vu wrote in a note dated Wednesday.

The upgrade comes a day after Singapore forecast a second year of budget surpluses despite Prime Minister Lawrence Wong unveiling a long list of handouts, rebates and infrastructure investments ahead of national elections due later this year.

The budget should benefit property developers given that no “new cooling measures” were announced, the JPMorgan strategists wrote. Retail landlords should see increased supermarket sales derived from government vouchers, they said.

The city-state’s equity benchmark, the Straits Times Index, has reached record highs in recent weeks, largely driven by a strong bank-sector rally and optimism for the government’s effort to revive the stock market. The government is rolling out a range of incentives, including tax measures, to combat low liquidity and a lack of new listings.

JPMorgan strategists said they continue to prefer banks and industrial stocks, while staying selective in real estate investment trusts. Its bull-case target for the Straits Times Index is 4,200, implying 7% upside from current levels.