Singapore stocks tumbled by the most
among developed markets last month as investors pulled cash from
Southeast Asia on concern about the future of global stimulus.
Singapore’s Straits Times Index, the benchmark gauge for
the region’s biggest market, dropped 7.5 percent in the 10 days
through Aug. 28, its longest losing streak since 2002. The gauge
slumped 6 percent in August, the worst performance among the
world’s developed equity markets. Jardine Cycle Carriage Ltd.,
the largest shareholder of Indonesia’s PT Astra International (ASII),
and commodities trader Olam International Ltd. led declines.
Stocks in Southeast Asia sank faster than global equities
on signs regional economic growth is slowing and as Federal
Reserve policy makers prepare to reduce U.S. bond buying that
had prompted investors to buy riskier assets. Investors pulled
$2.2 billion from Thailand, Indonesia and the Philippines in
August, after plowing $6.8 billion into the markets in 2012,
data compiled by Bloomberg show.
“Singapore is a barometer for Southeast Asia,” Wellian Wiranto, Singapore-based Asian investment strategist at Barclays
Plc’s wealth-management unit, said in an interview on Aug. 28.
“Choppiness elsewhere brings ripples here. Investors are
probably concerned about the risk of contagion amid capital
outflows from neighboring markets like Indonesia and the
Philippines.”
Stimulus Tapering
The Straits Times Index has slumped 12 percent since Fed
Chairman Ben S. Bernanke said May 22 the central bank may start
tapering $85 billion in monthly U.S. bond purchases if the
world’s biggest economy improves. The city’s stock market
benefited from loose monetary policy in the past few years as
shares offered investors attractive dividend yields, said Khiem Do, Hong Kong-based head of multi-asset strategy at Baring Asset
Management Ltd., which manages about $57 billion.
Policy makers were “broadly comfortable” with Bernanke’s
plan, minutes of their last meeting showed. The Fed will
probably begin paring bond purchases when it next meets Sept.
17-18, according to 65 percent of economists surveyed by
Bloomberg last month.
Singapore is the only developed market among countries in
the Association of Southeast Asian Nations, which also includes
Laos, Brunei, Cambodia, Indonesia, Malaysia, Myanmar and
Vietnam.
Asean Redemptions
Shares listed in Singapore are worth $558.4 billion,
compared with $455.4 billion for Malaysia, the second-biggest
equities market in the region, according to data compiled by
Bloomberg.
“Singapore has been affected by redemptions from Asean
since it’s the biggest market,” Baring’s Do said in a telephone
interview on Aug. 26. “It’s being lumped together with
Indonesia, Thailand and the Philippines where capital outflows
have accelerated.”
While Singapore’s assets are more attractive than those in
neighboring Indonesia, investors may be choosing to sell their
holdings in Singapore because the city-state’s currency is more
stable, he said.
The Singapore dollar fell 0.3 percent against the U.S.
dollar last month, compared with a 5.9 percent decline for the
Indonesian rupiah, a 2.8 percent drop for the Thai baht, a 2.5
percent slide for the Philippine peso and a 1.2 percent loss for
the Malaysian ringgit, according to data compiled by Bloomberg.
Currencies Slump
Regional currencies slumped as capital markets began to
price in reduced inflows when the Fed starts tapering stimulus,
Kelvin Tay, Singapore-based chief investment officer for
southern Asia-Pacific at UBS AG’s wealth management unit, wrote
in a note on Aug. 23. UBS said Singapore was its preferred
market in Southeast Asia, upgrading its rating from neutral.
“Singapore is likely to outperform,” Tay said.
“Singapore’s strong currency, resilient domestic economy, good
earnings-growth potential and exposure to developed markets’
recovery make it appealing to foreign investors.”
The nation’s economic growth rate accelerated to 3.8
percent in the second quarter from a year earlier as services
industries expanded, offsetting weaker exports. In the same
period, economic expansion slowed in Thailand, Indonesia and the
Philippines.
Singapore’s Straits Times Index (FSSTI) traded at 14 times
estimated earnings as of Aug. 30, compared with 16.1 for the
FTSE Bursa Malaysia KLCI Index, 17.4 for the Philippine Stock
Exchange Index and 10.4 for Hong Kong’s Hang Seng Index,
according to data compiled by Bloomberg.
‘Less Attractive’
Shares on the Straits Times Index offer an average dividend
yield of 3.4 percent compared with 2.7 percent for 10-year
Singapore government bonds, the data show. CapitaMall Trust (CT), the
retail property trust controlled by Southeast Asia’s biggest
developer CapitaLand Ltd., and Hutchison Port Holdings Trust,
partly-owned by billionaire Li Ka-shing’s Hutchison Whampoa
Ltd., are among the gauge’s 30 members.
“We don’t see a lot of catalyst for the market to recover
at this stage,” Daphne Roth, Singapore-based head of Asian
equity research at ABN Amro Private Banking, which oversees
about $207 billion, said in a telephone interview on Aug. 26.
“As investors start to price in rising interest rates,
Singapore’s high-yield REITs become less attractive.”
The FTSE Real Estate Investment Trust Index, which tracks
prices of the city’s biggest REITs and has an average dividend
yield of 5.3 percent, sank 6.7 percent in August. U.S. 10-year
bond yields climbed for a fourth month, touching the highest
since July 2011.
“Singapore is getting hit from two sides,” Nader Naeimi,
Sydney-based head of dynamic asset allocation at AMP Capital
Investors Ltd., which manages more than $130 billion, said in a
telephone interview on Aug. 23. “Firstly, it’s being lumped
together with other Southeast Asian markets like Indonesia and
the Philippines. Secondly, investors are selling high-yield
Singapore REITs as bond yields are rising.”
To contact the reporter on this story:
Jonathan Burgos in Singapore at
jburgos4@bloomberg.net
To contact the editor responsible for this story:
Sarah McDonald at
smcdonald23@bloomberg.net
Singapore Stocks Worst in Developed World: Southeast Asia
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