Overseas investment

[blackclock]

I notice that the stock market in SG is dwindling. With except to some IPO in Reits, there are not much reputable new listings. At the same time, due to weak valuation, many companies are delisting. The focus seems to be shifting towards Shanghai & HK. I don't think SG market is worth looking at anymore. If you look at the STI components, most local companies aren't doing well, except the banks.

Just wonder if anyone is looking at oversea investment. Like Australia, US, UK or Vietnam market.

[Bibi]

I share the same sentiments as you and thats the reason why I had signed a form to trade overseas shares few months ago. Spore STI is like having a lost decade. For a decade STI is still not reaching its previous high in 2007. majority of shares here are also quite illiquid. I will be putting more money into overseas shares when opportunity arises.

[blackclock]

Bibi, which country you looking at? do you mind sharing?
I think Australia will do well in long term. Right now, the trade war may cause some drag. But in long term, Australia has massive resources to meet world demand. The population is super low, which means huge room for growth. Aussie banks seems way better bet than Sg banks in long term.

Sg is attractive for people to seek shelter for their savings. But not really attractive for trading and other business activities, as China look to build up it's own supply chain in Batam & Melaka.

[Bibi]

I have not bought any overseas shares nor really look into them. Likely only USA stocks for the time being. And its because i think their valuation is pretty high that y I am dragging my feet to look into them. But yet, their indices keep breaking new high.

[karlmarx]

About two years ago, I thought that there wasn't much cheap stocks to be found in the Singapore market. So I started looking into our regional markets: Malaysia, Indonesia, Thailand, and Philippines. The market of these developing countries should be pretty shunned by investors, since they would prefer the market of developed countries, or so I thought.

Turns out there are plenty of institutional money in these 'emerging markets,' and their valuations are generally much higher than Singapore's. Especially Thailand. Against my own measurement, most of the stocks in Singapore are trading close to fair prices. The stocks in Thailand are mostly 3-5x, and some even 10x, what I think they are worth. Probably my ruler is broken. And probably also the reason why the Baht is so strong.

I have not looked at US or HK markets, because, well, time. But I think the delistings going on in the Singapore market should suggest that there is some bargain to be found here. It is not eye-poppingly cheap, but it is relatively cheaper than those found in the regional markets. Probably there are bargains to be found in US/HK markets, but then you'll have to be looking for them; they won't be your obvious/popular names.

Since there may be a chance that the Singapore market may weaken some time later, you might want to prepare by thinking about what stocks you would like to buy, and at what price, when the discounts start coming. After all, there is an added counterparty risk when buying overseas stocks, and not to mention that you will less likely have familiarity with their product/services, or the propensity to attend their AGM. I'm not saying that you cannot make money from overseas stocks. But if there are two similarly undervalued companies, why not buy the one on your home ground?

[dreamybear]

I share the same sentiments as you and thats the reason why I had signed a form to trade overseas shares few months ago. Spore STI is like having a lost decade. For a decade STI is still not reaching its previous high in 2007. majority of shares here are also quite illiquid. I will be putting more money into overseas shares when opportunity arises.

IMHO, I also think S'pore has peaked, and already past its golden age.

The previous/older generations were the luckier ones in having seen remarkable improvement in their lives during the 70s/80s/90s:
- There were more career opportunities to be trained and to work in areas unrelated to one's tertiary education or job experience. I guess it's because in the past, S'pore was still an inexpensive country for companies, and there was a severe shortage of manpower due to its rapid industrialization. These days, it is more profitable for companies to go for a cost-effective foreign talent workforce.

- Some of older generation got rich by investing in property early whereas some of them shared in their  blog posts about buying blue chips years ago, and the dividends rec' thus far have fully paid off their original investments.  While not all of the older generation have benefited equally and some have sadly been left behind, they do have better odds in terms of asset appreciation during the country's journey from 3rd to 1st in 1 generation.

Taking a look at an e.g. of STI and Japan ETF performance(both developed countries) respectively :
1. https://sg.finance.yahoo.com/quote/es3.si/
2. https://sg.finance.yahoo.com/quote/EWJ?ltr=1

it does seem their prices have gone nowhere if we select : "Max no. of years", with 1.5-3.5% annual yield. The question is moving forward, where do we think STI will go - 7000(roughly double) within next 10/20 years ? SPH, once a STI darling dishing out juicy dividends is now a pale shadow of itself; Telcos are not as profitable as before, our local banks are trying to grow their overseas business etc. Based on our small no natural resources country without an ensemble of Japan/Germany type of SME powerhouses & coupled with an unsustainable birth rate, we have to consider the odds of our already developed-status economy will be able to achieve the desired future growth rates to support the future valuations of the STI stocks.

For me, I am blessed to meet someone who broadened my horizons and opened my eyes to outside of the STI, in the most unexpected circumstance. That was when I had an epiphany and began to look at my home country S'pore through a global perspective.

Having said that, I think I have shared in my earlier posts, investing in overseas shares do have some disadvantages, e.g. forex(fluctuations can easily wipe off 10% of gains), no share lending income, custody/admin fees, dividend tax(I think it's a hefty 30% for US). The 4% share lending income is quite significant, for e.g. I am still receiving it for my Best World shares even though it's currently suspended. So I guess there are always tradeoffs.  

But if I am not wrong, our homegrown capable fund managers like Aggregate, Lumiere Capital, etc are more heavily invested in HK stocks than S'pore stocks. And WB seems to be very confident of the future of USA*. Oh well, I guess there are no model answers in investing.

*https://buffett.cnbc.com/2018/07/02/buffett-on-america.html

[karlmarx]

I share the same sentiments as you and thats the reason why I had signed a form to trade overseas shares few months ago. Spore STI is like having a lost decade. For a decade STI is still not reaching its previous high in 2007. majority of shares here are also quite illiquid. I will be putting more money into overseas shares when opportunity arises.

IMHO, I also think S'pore has peaked, and already past its golden age.

The previous/older generations were the luckier ones in having seen remarkable improvement in their lives during the 70s/80s/90s:
- There were more career opportunities to be trained and to work in areas unrelated to one's tertiary education or job experience. I guess it's because in the past, S'pore was still an inexpensive country for companies, and there was a severe shortage of manpower due to its rapid industrialization. These days, it is more profitable for companies to go for a cost-effective foreign talent workforce.

Since capital is mobile and can move to where it is best treated, I think this is fair to consider whether Singapore is an ideal place for one's capital. Especially for a Singaporean.

Barring another industry-specific boom (oil & gas, electronics, real estate, etc), I agree that it is likely that Singapore's economy will not grow at the pace it had between 1970-2000.

I think the impression that the government likes to give us, that our neighbours are hungry to steal our lunch, and so we musn't be complacent and rest on our laurels, are quite reflective of the regional competition. Even though our neighbours have larger land mass and population, they recognise that their future growth comes from being bigger exporters, and not so much on domestic demand. In other words, their growth strategy is similar to Singapore's. This is particularly the case for Malaysia and Thailand. Where export industries are concerned, they are very aggressive in courting foreign capital, using policies that are very much more liberal compared to those regulating its domestic-economy industries.   

Indonesia is slightly more unwilling to go down this same route because it has a much larger domestic economy with which to develop.

So while Singapore and her neighbours are all seeking to move up the value chain, Singapore has managed to stay ahead because of how the country is managed. It is more efficient and effective. But of course, there are costs -- though not necessarily financial -- to such a system. And these are borne by the populace. Whether such a system can be sustained is key to whether further economic growth is possible.

Assuming that Singapore's populace remains dogged in their economic pursuits, I am quite sure that she will remain ahead in the region. What will be the future growth drivers? Probably in things that we are already doing, but higher up the value chain. 

What does this mean for Singapore's stock market?

Because of Singapore's lower growth potential, observers should not be surprised with its lower stock market valuation multiple. On a broad index level, the returns are likely to more or less track the gdp growth rate. But in specific industries, fortunes may differ vastly as the prosperity of each industry depends more on its global supply chain situation, than Singapore's domestic demand. Banking, petrochemicals, shipping, oil and gas, air travel, and electronics, are probably examples most can relate to. So there are opportunities for exposure to different regional/global industries. But since their fortunes may differ, investors will have to choose wisely.

So if the Singapore stock market is an aggregate of the health of regional and global industries, then a lackluster STI perhaps reflects a lackluster regional/global economy.

Though I do acknowledge that the animal spirits in other markets are stronger, and hence, seems to offer better, more exciting prospects.

[Bibi]

But if there are two similarly undervalued companies, why not buy the one on your home ground?

I used to have similar thinking as u. But this time round i will not hesitate to put my money in USA stocks if there are 2 similarly undervalued companies. Because in the end, US stocks will far outperform Spore ones based on historical indices charts.

[blackclock]

I agree with dreamybear's view that Sg has peaked. There's no way it can grow anymore.

Let's break down by industries

Pharma
Doing well. With many medicine factories in Tuas

Banking
Doing well. Except for trading
Expected to get affected after Melaka complete the port

IT
Seems good.
Google, Facebook & Alibaba seems to be investing here.
The issue is that they may eat up the Ad revenues of local companies, before they pull in revenues from the region.
Redmart is taking market share away from NTUC. For more details, please read NTUC's annual report

Aerospace
Seems ok for Rolls Royce, Pratt & Whitney
But not good for MRO. Airbus & Garuda are competing
SIA seems to weaken by agreeing to code share with Malaysia Airline
(I think this will damage SIA's brand, but can you see how desperate they are?)

Electronics
Vietnam & Malaysia are a serious competitor in this area
Broadcom has return to USA. It's setting up another facility in Penang
Heptagon is retrenching a lot of workers, due to lower Apple sales.
Global foundries is not doing well, despite huge gov support. And eventually sold to Arabs.
I expect it to go on decline

Oil & Gas
Very poor outlook ahead. Malaysia is courting these companies. GE, Honeywell, McDermott move their HQ to KL
Shale oil & gas has changed the game. Don't think deep sea drilling will be in high demand
USA will become net exporter of oil soon. That means less deep sea exploration is required.

Port
China is investing aggressively into Batam ports. It may serve as a gateway to Indonesia
Similar to the way Hong Kong serve China in the past.
Similarly, China is building another large port in Melaka. PSA got to work harder to overcome the competition.
With no hinterland, it's difficult to play this game

Service center for MNC
Regional countries are opening up. There's less incentive for MNC to setup base here
Indonesia, Malaysia, Vietnam now openly invite MNC with less red tape.
HR, Finance, Procurement, IT white collar jobs will be harder to come by

[blackclock]

Please feel free to correct my opinion. Appreciate Karl, Dreamy & Bibi for sharing your views.
Hope we can find new areas for long term investment.

USA have the most number of companies that can continue to grow for decades ahead. They got high pop, strong global market reach, best talents, and strong army to get what they want. I think it's a great market to invest in. Just that the price is very high right now for most stocks.

SG market is getting more attractive with lower valuation. The issue is that some of the attractive companies are delisting, like OSIM has moved to HK. There are locals banks that look good for now. Except the banks, I don't see much goodies for larger cap companies.