An opportune time to invest in Singapore Bonds By Manulife Investment Management 2 Feb 2021
Singapore bonds performance in 2020 Amidst a challenging 2020, Singapore bonds turned in a resilient performance. With the spread of Covid-19 accelerating in the first quarter of 2020 leading to lockdowns across countries globally, the virus roiled economies and financial markets. Singapore’s economy was not spared as well, with the country’s Gross Domestic Product (GDP) contracting by 0.2%1 year-on-year in the first quarter of 2020 as services sector activities shrank on the back of a sharp decline in tourist arrivals and a fall in domestic consumption relating to Covid-19. The construction sector was also severely impacted by supply chain disruptions and delays in the return of foreign workers.
Central banks around the world turned to monetary and fiscal stimulus to spur economic recovery. Singapore was no different as the Monetary Authority of Singapore (MAS) took actions to ease monetary policy by cutting the rate of appreciation of the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) to 0%2, and the local government pledged fiscal stimulus of more than S$50 billion3 to support the economy. During the first quarter of 2020, investors started seeking safe-haven assets such as Singapore sovereign bonds and hence, the 10-year yield declined from 1.7% in January to less than 1% in early March4. In contrast, risk assets corrected globally and Singapore dollar credit spreads widened over the first quarter. Consequently, Singapore bonds gained over the first quarter with Singapore sovereigns outperforming corporate bonds.
Following the volatility in the first quarter, financial markets gradually recovered over successive quarters. Investor sentiments were mixed as there were growing signs of economic recovery, yet at the same time, countries around the world were struggling with new waves of the Covid-19 across the globe. Towards the end of 2020, risk sentiments improved on the back of the Covid-19 vaccine news and improving global economic activities. With this backdrop, the Singapore 10-year sovereign yield eventually ended the year at 0.83%5 and credit spreads for Singapore corporate bonds also narrowed.
Overall, Singapore bonds had a relatively strong year and gained 7.86%6 in 2020. This was driven primarily by the decline in Singapore government bond yields on the back of accommodative monetary and fiscal policies, and strong demand for safe-haven assets. Singapore dollar corporate bonds also recovered on better investor sentiment to help boost overall returns.
Why Singapore Bonds is an attractive asset class for investors
Manulife Singapore Bond Fund aims to deliver stable returns in unpredictable markets. Here are the key features of the Fund: Focus on Singapore
Focus on high quality bonds
Chart 1 Source: Manulife Investment Management, as of 31 December 2020.
Flexible allocation across different sectors
Chart 2 Source: Manulife Investment Management, as of 31 December 2020.
Award-winning fund with a track record longer than a decade
Chart 3 Source: Manulife Investment Management, Morningstar, as of 31 December 2020. Past performance is not indicative of future results. Investment involves risk. Investors should not only base on this material in isolation to make investment decisions and should read the Fund prospectus for details, including the risk factors, charges and features of the Fund.
Conclusion Singapore bonds have proven to be a resilient asset class for investors looking for stable income and capital preservation. In the turmoil of financial markets due to the pandemic last year, Singapore bonds managed to outperform many other asset classes as a result of their stand-out quality as a safe haven asset in times of market stress. In a world of negative-yielding assets, coupled with interest rates expected to stay lower for longer, Singapore bonds are a strong choice for investors looking for exposure to highly rated government and corporate bonds should deliver attractive risk-adjusted returns. Manulife Investment Management is a leader in Asian fixed income and has a highly experienced and award-winning investment team which has been successfully managing the Singapore bond strategy for over ten years and is well-positioned to capture opportunities for investors interested in accessing this asset class.
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Notes 1 Source: Department of Statistics Singapore, 4 January 2021 3 Source: Prime Minister’s Office Singapore, 30 June 2020 4 Source: Monetary Authority of Singapore, 30 March 2020 5 Source: Monetary Authority of Singapore, 31 December 2020 6 Source: Bloomberg, 31 December 2020. Singapore bonds returns represented by Markit iBoxx ALBI Singapore Index 7 Source: Singapore Budget 2020, 05 June 2020 8 Source: Bloomberg, 17 November 2020
Manulife Investment Management's Disclaimer
Important information Manager of the Manulife Singapore Bond Fund (the “Fund”): Manulife Investment Management (Singapore) Pte. Ltd. (“Manulife”) (Company Registration Number: 200709952G). The information provided herein does not constitute financial advice, an offer or recommendation with respect to the Fund. Opinions, forecasts and estimates on the economy, financial markets or economic trends of the markets mentioned herein are not necessarily indicative of the future or likely performance of the Fund. The Fund may use financial derivative instruments for efficient portfolio management and/or hedging.
Investments in the Fund are not deposits in, guaranteed or insured by the Manager and involve risks. Past performance of the manager or sub-manager is not necessarily indicative of its future performance. The value of units in the Fund and any income accruing to them may fall or rise. Past performance of the Fund is not necessarily indicative of future performance. Investors should read the prospectus, and seek advice from a financial adviser before deciding whether to purchase units in the Fund. A copy of the prospectus and the product highlights sheet can be obtained from Manulife or its distributors. In the event an investor chooses not to seek advice from a financial adviser, he should consider whether the Fund is suitable for him.
This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
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Information is correct as of 02/02/2021. |