Singapore Economic News

[RachelProp]

Singapore forex platform raises $23.5 mil in series B funding, counts HSBC and Citigroup among investors

https://www.theedgesingapore.com/news/co...-citigroup

[RachelProp]

EHT says sponsors Wu and Woods made deals "prejudicial" to minority unitholders

https://www.theedgesingapore.com/news/co...nitholders

[RachelProp]

"Scheme of deceit" may have been committed at Universal Resource and Services

https://www.theedgesingapore.com/news/co...d-services

[RachelProp]

Singapore prepares for a 'new normal' after Jun 1 with a three phase approach

https://www.theedgesingapore.com/news/co...e-approach

[RachelProp]

'Decent start' for S-REITs as cash conservation remains key; investors to stay selective: analysts

https://www.theedgesingapore.com/capital...-selective

[RachelProp]

Maybank Kim Eng sees crude turnaround in ASEAN

https://www.theedgesingapore.com/capital...ound-asean

[RachelProp]

Weakness ahead as short-term indicators fall

https://www.theedgesingapore.com/capital...ators-fall

[tanjm]

There has been much complaint about how the STI Index and the SGX public listed members in general, reflect so little about the economy of Singapore, and is insufficiently diversified. And now, we have a COVID crisis, a crisis that some say may permanently change some things about our economy (the more prominent being to travel and to working from home).

To that I counter that there is a macro picture we may not be considering : the Singapore govt.

It is a truism in value investing that we are interested in all the future cash flows of a investment. Therefore, when a market or stock goes down, we need to consider if there is “permanent” damage or “temporary” damage to earnings potential. With the forward looking actions of the Singapore govt to try to preserve or even enhance Singapore’s reputation for forward looking, efficiency and stability, and the firepower to back it up (our probable 0.5 to 0.75 trillion dollars in reserves), I think it is fair to say that this downturn in earnings is temporary. Even if there is a permanent shift in work, play, and industry, we have sufficient power to make the transition nicely.

To that end, despite the STI being very poorly diversified, the STI index may represent a decent way to participate in this macro conclusion, without a lot of hand wringing about what to invest in next. It is top heavy in the 3 local banks. But the 3 local banks are a proxy to Singapore’s economy. When Singapore does well, they do well (up to a point).

Any comments?

[karlmarx]

Sure, the government can stimulate the economy, and even assist its GLC STI components.

But it cannot wave a wand to improve the competitive positions of poorly performing companies, especially for those in a global market. You need a different breed of management talent to win in a global market, and evidently, it's not the kind that is nurtured in a traditional confucian scholarship system.

So those GLCs which face global competition tend to fare worse. Natsteel, Chartered Semiconductor, and NOL are some of the GLC STI components to be forgotten. Others such as SPH, SIA, CDG, and Starhub have also performed poorly in the face of varying intensities of competition, covid notwithstanding.

And of course, there are just as many non-GLC STI components being relegated. Like Creative, IPC, Noble, Golden Agri, and HPHT.

So the STI components that were relegated/privatised failed the market's 'survival of fittest' test. And investors should always avoid such types.

So maybe it is best to avoid those which fit the above's description, and pick those with a larger domestic market, like banks, reits, and developers. And maybe some of the components with majority foreign ownership and management.

Even so, there may be banks, reits, and developers which will disappoint in the years ahead. Being a winner now doesn't mean you'll always be, especially if you're not as competitive.

But if it is difficult for one to pick the winners or avoid the losers, it isn't such a bad idea to just buy the index, and accept some exposure to the 'losers.' Since the local banks, reits, and developers already make up most of the STI, the exposure to losers should be minimal, which makes the trade-off (of having to make picks) acceptable.

[tanjm]

Sure, the government can stimulate the economy, and even assist its GLC STI components.

But it cannot wave a wand to improve the competitive positions of poorly performing companies, especially for those in a global market. You need a different breed of management talent to win in a global market, and evidently, it's not the kind that is nurtured in a traditional confucian scholarship system.

So those GLCs which face global competition tend to fare worse. Natsteel, Chartered Semiconductor, and NOL are some of the GLC STI components to be forgotten. Others such as SPH, SIA, CDG, and Starhub have also performed poorly in the face of varying intensities of competition, covid notwithstanding.

And of course, there are just as many non-GLC STI components being relegated. Like Creative, IPC, Noble, Golden Agri, and HPHT.

So the STI components that were relegated/privatised failed the market's 'survival of fittest' test. And investors should always avoid such types.

So maybe it is best to avoid those which fit the above's description, and pick those with a larger domestic market, like banks, reits, and developers. And maybe some of the components with majority foreign ownership and management.

Even so, there may be banks, reits, and developers which will disappoint in the years ahead. Being a winner now doesn't mean you'll always be, especially if you're not as competitive.

But if it is difficult for one to pick the winners or avoid the losers, it isn't such a bad idea to just buy the index, and accept some exposure to the 'losers.' Since the local banks, reits, and developers already make up most of the STI, the exposure to losers should be minimal, which makes the trade-off (of having to make picks) acceptable.

Actually, I'm not talking about traditional supply side measures, which is what I assume you are talking about when you say stimulate.

In this crisis, as we all know, the issue is temporary collapse of demand and permanent supply disruption (bankruptcies and the like) through this demand disruption. What I see the govt doing at this point in time is :

temporary:
1. keeping as many businesses afloat as possible. So that they can reopen. The problem with unemployement insurance (as in the US) is that the business that may employ these workers once the crisis is over, may go kaput, possibly permanently destroying economic capacity. In our case, the govt is actually focusing on keeping the lights on, and ready for quick turnaround when the time is right.


2. abating the likelihood of large scale defaults in both businesses and individuals and their property. Again with the same goal of keeping the lights on.

permanent:
1. The govt is not only keeping SIA alive, they are potentially providing it with enough ammo to expand (possibly via M&A) when the crisis is properly managed. I don't really believe that in the long term, travel will be stunted. I think it will recover. All of the ancillary downstream busineses will be indirectly supported, as will Changi Airport eventually. And Changi will play a key role in expanding our role as a hub (see 2).

2. By instilling confidence in our healthcare system, our protocols for managing outbreaks and so on (akan datang : I expect better contact tracing and large increases in testing capacity), and sheer operational excellence, this is promoting brand Singapore as a place to do business, particularly with MNCs now needing to diversify out of China and HK. An operation in Indonesia or Vietnam may typically have a regional HQ in a place like Singapore.

Banks, property companies etc will be a proxy for all of this economic activity.

STI has never been really exciting, but it has thrown off a lot of dividends through the years, which if reinvested, do bump up returns. It is now pretty low, lower (relative to recent peak) than the S&P500 (ironic given the things happening in the US).