Singapore
Will Singapore Stocks Shine This Year?
The city state of Singapore was not affected severely during the financial crisis and is now well positioned to benefit from a rebound in the global economy. The seasonally adjusted unemployment rate for December 2009 was just 2.1%. As a major hub for international trade and commerce, for January this year total trade was up 33.2% and the industrial production was also up significantly. Tourist arrivals increased about 18% in January compared to the same month last year (Source: Statistics Singapore).
Resorts World Sentosa Casino, Singapore (Courtesy: Malaysia Finance)
The government of Singapore is famous for its forward-thinking and enacting policies that are growth-oriented. One of its visions was to transform Singapore into an entertainment mecca in Asia and attract visitors from the around the world especially from the fast-growing markets of China, India, etc. As part of this initiative, the country allowed the building of its first casino a few years ago. Resorts World Sentosa is an integrated complex that includes a casino, an Universal Studios theme park, hotels, shopping plazas, etc. The casino opened its doors on Feb 14th, the first day of the Chinese Year of the Tiger. Another casino resort named Marina Bay Sands and built by Las Vegas Sands is slated to be opened soon in the downtown business district. Once both the casinos are fully operational, they are projected to earn $2.1B in revenues this year according to CLSA Asia-Pacific markets. Most of the visitors are expected to be from overseas mainly from China as the casinos will charge a S$100 entrance fee for each 24 hours for Singaporeans.
In order to prevent over-growth of population and to protect local wages Singapore announced proposals last week to curtail immigration. Overall Singapore is in a relatively better shape compared to other developed countries. The opening of casinos and the theme park should provide additional growth to the local economy.
The iShares MCSI Singapore Index Fund (EWS) tracks the performance of the Singapore equity market.There are 30 holdings in the portfolio and the fund has total assets of about $1.5B. Two of the leading Singapore banks are United Overseas Bank (OTC: UOVEY) and DBS Group Holdings (OTC: DBSDY). Both the banks are well capitalized and have a large presence in other Asian countries as well. To answer my title question, Singapore stocks should perform well if the global economic recovery continues.
The Top 15 Singapore Stocks by Market Capitalization
The small city state of Singapore offers many investment opportunities. In recent years the country has positioned itself as a financial hub and has built a knowledge-based economy.
The following graphic shows the Top 15 Singapore Stocks by Market Capitalization traded in the Singapore Exchange as of November 30,2009:
Source: Singapore Exchange Ltd.
ETF : The iShares MSCI Singapore Index Fund (EWS)
Related: The Complete List of Singapore ADRs Traded on the OTC Markets
Taking the Pulse of Singapore’s Economy
The latest data from the Singapore government shows that the economy is still in contraction mode. The first quarter GDP shrank by 10.1% when compared to the same quarter last year.
Seasonally adjusted unemployment rate was just 3.3%. This figure is artificially kept low by the government due to the many incentives offered to private employers to keep workers on payroll and offer them training program. As the 60% of the GDP is related to exports (Source: Singapore’s Economy Begins to Stir) , Singapore’s economy is severely affected in the current recession. Global trade has slowed and especially exports from Asia to the West has fallen significantly.
The following are a few observations:
Singapore Port - Total Traffic in May 39, 318 compared to 40,207.5 ( in 000s tons) in April. Last year in May it was 45,893 tons. Container traffic tonnage remained almost the same in May from previous month but oil shipments were down slightly.
Total exports in first quarter was down 26% relative to same period last year.
Despite the fall in global trade, Singapore will weather this recession better due to sound policies implemented by the city state. Singapore’s banks were not heavily exposed to the subprime mess and balance sheets remain strong. The country does not have the foreclosure problem since default rates are very low. In addition savings rates are high and the real estate market is stable.
There are a couple of Singapore banks that trade in the OTC markets. They are United Overseas Bank (OTC: UOVEY) and DBS Holdings (OTC: DBSDY). Both pay over 4% dividends. A simple and easier way to invest in Singapore is the iShares MSCI Singapore Index Fund (EWS).
Singapore 2009 Growth Estimates Cut
The tiny city state of Singapore is not immune to the global economic turmoil. Up until last year Singapore had strong growth and was even hailed as the “Switzerland of Asia” due to many international financial institutions having offices there. The government of Singapore rode to boom and even granted licenses to develop huge casino/entertainment centers to attract tourist dollars from the fast growing Asian countries such as China, India, etc. One of the casino operators invited to build casinos near the city center was the Las Vegas Sands Corp. (LVS) owned by Casino Mogul Sheldon G. Adelson.
However in the past few months, Singapore’s economy has been hit hard just like other Asian economies. Real estate business has slowed and many foreign workers have been laidoff. Being a small country this actually reduces the population of the country as the workers leave for their homeland.
On Wednesday the Singapore government’s Ministry of Trade and Industry (MTI) “revised GDP growth forecast downwards to -5.0 to -2.0 per cent, lower than previous estimates of -2.0 to +1.0 per cent. “
They also stated that “the weaker economic outlook is due to faster and steeper decline in the global economic activity, as well as spill over effects on key sectors of the economy from the last quarter of 2008. “
Singapore does not produce many goods on its own. Its economy is heavily dependent on foreign trade as the Singapore port is a major hub for shipments from Asia to Europe, North America.As the global trade slows ports like HongKong, Singapore are impacted heavily. Hence investors can avoid Singapore now. Since not many Singapore stocks are listed in the US, the iShares MSCI Singapore Index (EWS) was the preferred option to own Singapore companies. Currently EWS has assets of $730M and the dividend yield is 7.26%.
It is also important to monitor to performance of the two OTC-listed Singapore bank: DBS Holdings (DBSDY) and United Overseas Bank (UOVEY).
DBS Holdings Update:
Today(Jan 21) DBS its “S$4 bln rights issue was oversubscribed”
“Singapore’s DBS Group,
“Acceptances and excess applications have been received for more than the total number of rights shares offered,” the bank said in a statement.
In December, DBS said it would offer shareholders one new share for every two existing shares at S$5.42 apiece, which was then a discount of about 45 percent. DBS shares were 57 percent above the rights issue price at the close of trading on Wednesday.”
Source: Reuters
The successful rights offering shows investor confidence in DBS Holdings.
Two Singapore Bank Stocks
There are two Singapore bank stocks that trade as ADRs in the OTC market. One is DBS Holdings and the other is United Overseas Bank.
Singapore is a tiny city state but has a strong and stable economy. Singapore is one of the financial hub of Asia and is soon becoming the “Switzerland of Asia” due to many foreign banks setting up operations there.
In recent years, Singapore has become a tax haven for offshore investors. This brings huge amount of capital into this small country.As a result Singapore is able to invest in high quality long-term value building projects.One such example is the upgrade of Changi Airport for the double-decker Airbus A380 at a cost of over S$60M.A new hotel/casino is being built in land reclaimed from sea as part of a huge entertainment complex development.
1.DBS Holdings Ltd - DBSDY
One of the main divisions of DBS is the DBS Bank Ltd.It operates some 86 branches in Singapore and has many foreign branches.
The current dividend yield is 4.23% and YTD the stock is down just over 3%.
2.United Overseas Bank Ltd - UOVEY
UOB is one of the large banks of Singapore with more than 500 offices located in many countries.
YTD the stock is down -1.80% and the dividend yield is 4.87%. UOB has market cap of about $20B which puts it near a US bank like PNC bank.PE is about 13.3 and the 5-year earnings growth is just over 16%.
Related: Top Trading Partners of Singapore in 2008
