SINGAPORE — Singapore’s markets look set to benefit as the world reopens and recovers from the pandemic, according to Nomura’s Chetan Seth.

“We turned constructive on Singapore six, seven months ago,” Seth, Asia-Pacific equity strategist at the firm, told CNBC’s “Squawk Box Asia” on Friday.

He said Singapore stocks are possibly among the best plays for the reflation, reopening or cyclical recovery trade regionally. Nomura currently has a neutral call on the country’s market.

As of its Thursday close, the Straits Times index in Singapore has risen about 11% so far in 2021. In comparison, the FTSE Bursa Malaysia KLCI Index in Malaysia has declined more than 6% while the SET Composite index in Thailand has risen about 7.1%.

Banks in Singapore tend to do well when U.S. 10-year yields rise, Seth said. Domestic yields tend to follow, turning into another tailwind for lenders. This has helped drive the country’s recent outperformance compared with its regional peers, the strategist said.

But Seth said the road ahead is “a bit tricky” and dependent on the outlook for U.S. 10-year yields.

In March, the U.S. 10-year Treasury yield jumped above 1.7% after the Federal Reserve said it does not plan to raise interest rates anytime soon nor taper its bond-buying program.

Yields have since fallen amid concerns over inflation as well as slower growth. The 10-year Treasury yield recently fell below 1.2% before seeing a partial recovery. It last sat at 1.2816%. Yields move inversely to prices, so a decline in the former means investors are buying bonds and pushing prices up.

Looking ahead, Seth said Singapore’s banks can continue to do well if the U.S. 10-year Treasury yield returns to 1.6% or 1.7%.

Seth said Nomura is currently “underweight” on Malaysian stocks as the structure of the country’s market is “not really conducive to sustain outperformance.”

“If you look at last year, Malaysia was one of the most resilient markets in Asia because parts of the market — let’s say glove makers — did very well,” he said. “That trade has been reversing, right? So I think that could continue to weigh on overall market.”

Malaysia was one of the few markets in Southeast Asia that saw growth in 2020. That came as shares of glove makers such as Top Glove surged due to pandemic-driven spike in demand. The trend has since reversed. Malaysia-listed shares of Top Glove have tumbled more than 30% so far this year.

Looking at Indonesia, Seth said he liked the market over the medium term but warned that the country’s Covid situation remained a near-term risk. Last week, Indonesia reported the most new Covid infections globally, according to the World Health Organization.

“We need to see some bit of sentiment improve on that front, but we like the (Indonesia) story,” he said.

— CNBC’s Jeff Cox contributed to this report.