Baring Asset Management Co. and Bank
Julius Baer Co. expect a deepening slump in Singapore stocks,
the worst performers this year among Southeast Asian markets.
The benchmark Straits Times Index dropped 4.9 percent from
Dec. 31 through last week, trailing gauges of Thai, Indonesian,
Malaysian and Philippine equities by at least 1.8 percentage
points. Stocks sank as data showed home purchases tumbled last
year to a four-year low and retail sales dropped, while
manufacturing growth weakened in China, Singapore’s biggest
export market.
“The Singapore selloff is due in large part to the
sputtering domestic economy,” said David Ross, Maryland,
Washington-based managing director of Chevy Chase Trust Co.,
which oversees about $15 billion. “The weakening consumer
economy portends weakness in the property segment that could
send ripples through the financial system. While not the most
likely scenario, the odds of a bursting property bubble are
increasing.”
Singapore shares posted the third-biggest decline among
developed markets this year after as much as $3 trillion was
wiped from equities worldwide on concern the global economic
recovery is faltering. The city’s regulators said Feb. 7 they
may introduce a minimum price for stocks and impose collaterals
and other restrictions for trades after a slump in the shares of
three commodity companies erased $6.9 billion in market value
over three days in October.
Office workers chat outside the SGX Centre, which houses the Singapore Exchange Ltd…. Read More
Office workers chat outside the SGX Centre, which houses the Singapore Exchange Ltd. headquarters, right, as evening falls in Singapore. Close
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Photographer: Bryan van der Beek/Bloomberg
Office workers chat outside the SGX Centre, which houses the Singapore Exchange Ltd. headquarters, right, as evening falls in Singapore.
Singapore companies will struggle to boost profits amid
rising wages and weakening demand for property, according to
Baring Asset and Samsung Asset Management Co. The Straits Times
Index (FSSTI) gained 0.1 percent as of 10:36 a.m. in the city today.
Home-Price Decline
House prices in Singapore, ranked the most-expensive city
to buy a luxury home in Asia after Hong Kong, slid in the fourth
quarter for the first time in almost two years, trimming annual
gains to the smallest since 2008. Two of the three biggest
declines on the Straits Times Index last year were property
developers.
CapitaMalls Asia Ltd. (CMA), the worst-performer on the gauge in
2014, may report this week that 2013 net income dropped 19
percent, based on the average of 15 analyst estimates compiled
by Bloomberg. Profits at Straits Times Index member companies
are expected to fall 1 percent this year, the data show.
“Singapore earnings growth is likely to disappoint this
year,” Alan Richardson, whose Samsung Asean Equity Fund
outperformed 96 percent of peers tracked by Bloomberg during the
past 12 months, said by phone from Hong Kong on Feb. 5. “The
key detractors are falling property prices and slowing economic
growth in China. The market has already factored in these issues
but a sustained market recovery will be difficult if
fundamentals are deteriorating.”
Penny-Stock Rout
The daily value of equities traded in Singapore sank to an
average S$1.08 billion this year from S$1.77 billion in the same
part of 2014 as risk sentiment deteriorated after a plunge in
the shares of Blumont Group Ltd. (BLUM), Asiasons Capital Ltd. (ACAP) and
LionGold Corp. in October.
The country may set up an independent listing committee and
boost enforcement, according to a joint statement from the
Monetary Authority of Singapore and Singapore Exchange Ltd. (SGX) on
Feb. 7, following its market structure review spurred by the
stock slump.
The city-state also plans to shorten the trade settlement
period to two days from three by 2016 and impose more
transparency for short selling, the central bank and exchange
said. They are seeking industry feedback over the next three
months.
January Slump
The Straits Times Index dropped 4.4 percent in January, the
worst start of the year since 2010 and the first time in four
years that it underperformed all Southeast Asian markets,
according to data compiled by Bloomberg.
“This is one of the worst Januarys we’ve seen,” said
Manoj Chaman Lal, vice president of corporate broking at CIMB
Securities Singapore Pte. “We never really got out of the
October ‘crisis’. If I could snap a picture of what the trading
room looks like, it’s almost like a library.”
Prime Minister Lee Hsien Loong is pushing companies to
produce more with fewer employees as the island confronts an
aging population and voter discontent about foreign workers.
Policies ranging from higher levies for overseas labor to
tighter limits on non-Singaporeans in some industries, have
boosted costs for companies including SIA Engineering Co. (SIE), which
said higher wages helped spur a 9.7 percent drop in third-quarter profit.
Drifting Lower
“Sentiment on Singapore isn’t that great,” Soo Hai Lim, a
Hong Kong-based fund manager at Baring Asset, which oversees
about $60 billion. “The market is drifting lower as there are
no visible catalysts. Cost pressures, particularly on wages, for
Singapore companies is quite high and that’s going to eat into
their profits.”
Shares on the Singapore benchmark index traded at 13 times
estimated earnings on Feb. 5, the lowest since June 2012. The
gauge gained 1.8 percent from then through the end of the week.
“We see a sell-off in the Singapore market to be short-lived,” Kum Soek Ching, Singapore-based head of Southeast Asia
research at Credit Suisse Private Banking, said by e-mail on
Feb. 4. “Valuations look quite attractive.”
Wing Tai Holdings Ltd. (WINGT), a developer of luxury homes near
the Orchard Road shopping belt, said last month net income in
the three months ended Dec. 31 tumbled 45 percent as demand for
new residential projects have been adversely affected by tighter
mortgage lending policies at Singapore banks. DBS Group Holdings
Ltd., Southeast Asia’s biggest lender, is expected to report
this week a 4.9 percent decline in 2013 profit, according to the
average of 23 analyst estimates compiled by Bloomberg.
Global Rout
Equities around the world are declining this year as
China’s economy slows, emerging-market currencies slump and the
Federal Reserve cuts stimulus. The MSCI World Index lost 2.9
percent since Dec. 31.
Indonesia was the only Asian nation among eight tracked by
Bloomberg where foreign investors bought more stocks than they
sold this year. Investors dumped $2.3 billion of South Korean
equities and $1.4 billion of shares in Taiwan, the data show.
“The money flow is not coming back to Asia for a while,”
Mark Matthews, Singapore-based head of Asia research for Julius
Baer, which oversees about $377 billion in client assets, said
by phone on Feb. 3. “I don’t see the bottom for Singapore
happening any time soon.”
To contact the reporters on this story:
Jonathan Burgos in Singapore at
jburgos4@bloomberg.net;
Jasmine Ng in Singapore at
jng299@bloomberg.net
To contact the editor responsible for this story:
Sarah McDonald at
smcdonald23@bloomberg.net
Singapore Stocks to Extend Region"s Biggest Rout: Southeast Asia
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