Singaporean stocks: a cheap play on life after Covid

Market Street Hawker Centre in Singapore

Singapore is getting back to work

(Image credit: © Bryan van der Beek/Bloomberg via Getty Images)

published 4 May 2022

Why China's Covid lockdowns will be the next big shock for global growth

The post-pandemic era has arrived in Singapore, says Daniel Moss on Bloomberg. Last week the city-state scrapped limits on group size and office working. “Many venues will no longer require folks to check in with the government contract-tracing app.” After two years of “uber-caution”, authorities have shifted with uncharacteristic haste. Fear that “onerous rules” were denting Singapore’s position as “a premier aviation hub” helped drive the decision to re-open. Trade-dependent Singapore “cares deeply about its reputation abroad”.

“The Singapore market stands out as a shelter in the current stagflation environment,” says Paul Chew of Phillip Capital. “Almost every sector… enjoys a tailwind. Transport, telecoms, retail and hospitality, which make up 20% of the Straits Times Index (STI), will benefit from the reopening of borders. Banks, which account for 45%, will get a “huge lift” from rising rates: a one percentage point rise in interest rates could increase earnings by 18%. The tech sector – once hot, but now struggling globally – is just 2% of the STI. The biggest Singapore-based tech stock is video games and e-commerce firm Sea, which is listed in New York instead. It’s down 61% this year.

That mix has helped the STI gain a healthy 7.5% this year (the MSCI Singapore index – which includes Sea – is down 6%). It doesn’t make up for an annualised return of just 5.2% in the five years to 31 March – partly due to its high weighting to financial stocks – compared with a global average return of 13%, but the long spell of underperformance has left it looking comparatively cheap. “Current valuations remain undemanding,” reckons Adrian Loh of UOB Kay Hian. At 3,350, the index is trading on 13.5 times forecast earnings for 2022, with a forecast yield of 4.1%.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Explore More

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and Emerging Markets, where his experience living in Beijing and conversational Chinese prove useful.

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.