Majulah Singapore Equities
As Singapore celebrates its achievements over SG54 and The Bicentennial since Sir Stamford Raffles' arrival in 1819, there seems to be a sense of cautious optimism amongst Singaporeans as well. The small fishing village has morphed into an economic and financial powerhouse, and the tiny red dot that has punched above its weight on the world stage is undergoing yet another transformation; Digitalization.
Just last month, the news of a possible technical recession in Singapore was all over the headlines.10
Singapore's Q2 GDP growth weakest in 10 years
The Singapore economy only grew 0.1% in Q2 of 2019, its slowest annual pace in the last 10 years. The International Monetary Fund (IMF) also trimmed its 2019 economic growth forecast for Singapore from 2.3% to just 2%, as global trade tensions hit exports from the city-state. The Monetary Authority of Singapore (MAS) has also lowered its forecast this year to be between 1.5% and 2.5%, down from 3.2% in 2018.1
The slump was largely driven by a slowdown in manufacturing, with the electronics and precision engineering sectors being affected the most.2 Singapore's exports in June also fell more than expected, marking their largest decline in past six years.3
Is it all doom and gloom for the Singapore economy?
As a small and open economy subject to the waves of global competition and challenges, Singapore is often described as a Sampan, albeit Sampan 2.0 with better defences and capabilities than before.4 Despite that, it is also important to remember that when the major economic powers sneeze, Singapore and the rest of the world will catch a cold.5 Such is the case of the US-China trade spat as well as the slowdown in the global engines of growth.
Given the less than rosy outlook, Singapore leaders find it imperative to address and allay the concerns of average Singaporeans without going into details. While Singapore economic growth slowed in Q2, Deputy Prime Minister Heng Swee Keat said, “The Government is not expecting a full–year recession for the Singapore economy at this point”.6 Minister for Trade and Industry Chan Chun Sing also pointed out that “Singapore is well–placed to weather uncertainties, but the Government stands ready to step up support for companies and workers here.”7
There are a few bright spots, however.
- Prospects of lower interest rates
Globally, interest rates are softening in line with the global growth slowdown, and domestic interest rates are likely to follow. This could mean less pressure for companies and individual borrowers to service their loans.2 - MAS monetary policy lowering SGD
The grim trade numbers added to a slew of weak economic data, which reinforces economists' expectations that the central bank could ease monetary policy at its October meeting. If the Singapore dollar is softer on a trade–weighted basis, then our exports will likely to be priced at relatively more competitive prices, but our imports will also cost more. - Singapore Budget 2020
Looking forward to 2020, a more expansionary Singapore Budget would also help to stimulate the economy. Furthermore, given the next General Election to be held by early 2021, there is a strong likelihood that Budget 2020 may also be relatively generous.8 - Singapore equities are more geographically diversified compared to the past
More than half of the STI components generate 50 per cent or more of their revenues outside the city–state, hence are less influenced by the domestic economy compared to two to three decades ago. The stock market is also decoupled from the economy because many of the companies on the stock market are more defensive.
What can you do as an investor?
Given the factors discussed above and the late cycle that we are currently at, it pays to adopt a defensive positioning on your investment portfolio, and one of the ways is to invest in Singapore equities. With an average dividend of roughly 4 percent and a price–to–earnings of 12.8x, the Singapore stock market is currently one of the few markets in Asia that is trading lower than its 10–year average of 13.5x and paying out one of the highest yields.9
Here are some dividend–paying Singapore Equities funds available on dollarDEX that pays an indicative yield of above 4% per annum.
You can easily search for these funds on our intuitive fund finder on dollarDEX. Get started today and start your no–fees investing journey with us on dollarDEX.
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Disclaimer
All information here is for GENERAL INFORMATION only and does not take into account the specific investment objectives, financial situation or needs of any specific person or groups of persons. Prospective investors are advised to read a fund prospectus carefully before applying for any shares/units in unit trusts. The value of the units and the income from them may fall as well as rise. Unit trusts are subject to investment risks, including the possible loss of the principal amount invested. Investors investing in funds denominated in non-local currencies should be aware of the risk of exchange rate fluctuations that may cause a loss of principal. Past performance is not indicative of future performance. dollarDEX is affiliated with Aviva but dollarDEX does not receive any preferential rates for Aviva products as a result of this relationship. Unit trusts are not bank deposits nor are they guaranteed or insured by dollarDEX. Some unit trusts may not be offered to citizens of certain countries such as United States. Information obtained from third party sources have not been verified and we do not represent or warrant its accuracy, correctness or completeness. We bear no responsibility or liability for any error, omission or inaccuracy or for any loss or damage suffered by you or a third party (including indirect, consequential or incidental damages) arising in any way from relying on this information.
This information does not constitute an offer or solicitation of an offer to buy or sell any shares/units.
This article has not been reviewed by the Monetary Authority of Singapore.
Information is correct as of 20/08/2019.
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3 https://www.channelnewsasia.com/news/business/nodx-june-exports-trade-statistics-down-11726888
4 https://www.straitstimes.com/world/singapore-remains-a-sampan-but-an-upgraded-20-version-pm-lee
5 https://www.todayonline.com/business/world-now-catches-cold-if-china-sneezes-not-us
8 https://www.todayonline.com/singapore/will-ge-be-held-2019-or-2020-we-look-case-each