Money managers are turning bullish on Singapore after shunning it for more than a year as political stability and cheap equity valuations push the city-state to the top of a Morgan Stanley market ranking.
Three-month flows into Singapore exchange-traded funds are on course to reach the most since Markit Ltd. began tracking the data in 2009. Investors took money out of the stock and bond funds for five straight quarters through June, the Markit data show.
The benchmark Straits Times Index has rebounded 13 percent from this year’s low on Feb. 5 and Singapore’s sovereign debt returned 3 percent this year.
Singapore shares are the most attractive among Asia ex-Japan and emerging-market equities, beating Hungary, Chile and China, according to a Morgan Stanley study using measures from earnings to corporate governance and technical indicators.
The investment bank predicts companies in the Southeast Asian city-state will beat consensus earnings forecasts after the economy expanded at a quicker-than-expected pace in the second quarter.
“The Singapore market is somewhat undervalued for a pretty strong growth environment with positive earnings revisions,” said Jonathan Garner, Hong Kong-based head of Asia and emerging-market strategy at Morgan Stanley.
“We also like the fact that the market scores very highly in terms of our political risk and corporate governance model.”
While the Straits Times Index is trading close to its five-year average forward earnings multiple, the valuation of the Standard & Poor’s 500 Index is more than 17 percent higher, data compiled by Bloomberg show.
Daphne Roth at ABN Amro Private Banking is among investors remaining bearish, seeing limited gains as constrained credit growth damps consumer spending.
The yield on Singapore government bonds due in a decade closed at 2.35 percent Sept. 5, down from as high as 2.59 percent in January, according to prices from the Monetary Authority of Singapore.
Short Sellers
Ten exchange-traded funds that track Singapore saw about $338 million of net inflows in the first six weeks of this quarter following five quarters of outflows, according to the Markit data. Seven were equity ETFs, with cash and bond funds making up the rest.
The average of free float shares on loan across companies on the Straits Times Index (FSSTI), a key gauge of short selling, slid to 1.2 percent Aug. 29, Markit data showed. That was an 18-month low. Short sellers borrow assets to bet on a decline in prices, hoping to buy them back later and pocket the difference.
“Global investors still look to Singapore for exposure to some specific and unique themes,” said Jason Low, an equity strategist at DBS Private Bank in Singapore.
“The Straits Times Index could head towards 3,500 should the earnings revision trend turn positive in subsequent quarters.” That’s 4.7 percent above the close last week.
Worst Performance
The Straits Times Index ended last year 0.35 points from where it started, the worst performance among 24 developed markets tracked by Bloomberg. The measure’s 5.5 percent gain ranks it 14th in 2014.
Earnings per share on the gauge will slip 0.3 percent in the next 12 months, before increasing 3 percent in the following year, according to estimates compiled by Bloomberg.
Investors who are bearish on Singapore point to the city’s property curbs, which include a cap on mortgage payments at 60 percent of a borrower’s monthly income. Real-estate firms comprise about 15 percent of the Straits Times Index.
“We don’t see any catalysts going forward as we don’t see any of the measures brought in to cool property prices being removed,” Roth, head of Asian equity research at ABN Amro Private Banking, said in a phone interview.
“There aren’t enough catalysts to make me positive.” ABN Private Banking manages about 168 billion euros ($218 billion).
Attractive Banks
Soo Hai Lim, a Hong Kong-based fund manager at Baring Asset Management Ltd., says only parts of the market are attractive.
“We need to be more selective on the Singapore market as we find more compelling opportunities in the smaller Southeast Asian markets,” said Lim, whose firm oversees about $60 billion. “Singapore banks are doing OK and offering decent yields. For longer term investors, banks will be a good investment.”
Banks account for the largest proportion of Singapore’s market, with DBS Group Holdings Ltd., Oversea-Chinese Banking Corp. and United Overseas Bank Ltd. comprising more than 30 percent of the gauge.
They are forecast to pay an average 3.3 percent dividend yield for the next 12 months. Singapore’s robust public finances and political stability helped the country keep its AAA credit score at Standard & Poor’s, the ratings company said in May.
Debt Returns
The nation’s sovereign debt has returned 3 percent so far this year, or an annualized rate of 4.4 percent, Bank of America Merrill Lynch index data show. A 4.4 percent gain for the year would be the most since 2011.
The MSCI Singapore Index will climb 8.7 percent during the next 12 months, according to Morgan Stanley projections. Gross-domestic product climbed 2.4 percent in the second quarter from a year earlier, more than economists had forecast.
Garner’s quantitative model ranks Singapore top of 27 markets on factors from valuations to governance and technical indicators.
“There’s been an improvement in the weighting position on Singapore,” said Garner. “In this particular global environment, Singapore does quite well.”
bloomberg.com
Three-month flows into Singapore exchange-traded funds are on course to reach the most since Markit Ltd. began tracking the data in 2009. Investors took money out of the stock and bond funds for five straight quarters through June, the Markit data show.
The benchmark Straits Times Index has rebounded 13 percent from this year’s low on Feb. 5 and Singapore’s sovereign debt returned 3 percent this year.
Singapore shares are the most attractive among Asia ex-Japan and emerging-market equities, beating Hungary, Chile and China, according to a Morgan Stanley study using measures from earnings to corporate governance and technical indicators.
The investment bank predicts companies in the Southeast Asian city-state will beat consensus earnings forecasts after the economy expanded at a quicker-than-expected pace in the second quarter.
“The Singapore market is somewhat undervalued for a pretty strong growth environment with positive earnings revisions,” said Jonathan Garner, Hong Kong-based head of Asia and emerging-market strategy at Morgan Stanley.
“We also like the fact that the market scores very highly in terms of our political risk and corporate governance model.”
While the Straits Times Index is trading close to its five-year average forward earnings multiple, the valuation of the Standard & Poor’s 500 Index is more than 17 percent higher, data compiled by Bloomberg show.
Daphne Roth at ABN Amro Private Banking is among investors remaining bearish, seeing limited gains as constrained credit growth damps consumer spending.
The yield on Singapore government bonds due in a decade closed at 2.35 percent Sept. 5, down from as high as 2.59 percent in January, according to prices from the Monetary Authority of Singapore.
Short Sellers
Ten exchange-traded funds that track Singapore saw about $338 million of net inflows in the first six weeks of this quarter following five quarters of outflows, according to the Markit data. Seven were equity ETFs, with cash and bond funds making up the rest.
The average of free float shares on loan across companies on the Straits Times Index (FSSTI), a key gauge of short selling, slid to 1.2 percent Aug. 29, Markit data showed. That was an 18-month low. Short sellers borrow assets to bet on a decline in prices, hoping to buy them back later and pocket the difference.
“Global investors still look to Singapore for exposure to some specific and unique themes,” said Jason Low, an equity strategist at DBS Private Bank in Singapore.
“The Straits Times Index could head towards 3,500 should the earnings revision trend turn positive in subsequent quarters.” That’s 4.7 percent above the close last week.
Worst Performance
The Straits Times Index ended last year 0.35 points from where it started, the worst performance among 24 developed markets tracked by Bloomberg. The measure’s 5.5 percent gain ranks it 14th in 2014.
Earnings per share on the gauge will slip 0.3 percent in the next 12 months, before increasing 3 percent in the following year, according to estimates compiled by Bloomberg.
Investors who are bearish on Singapore point to the city’s property curbs, which include a cap on mortgage payments at 60 percent of a borrower’s monthly income. Real-estate firms comprise about 15 percent of the Straits Times Index.
“We don’t see any catalysts going forward as we don’t see any of the measures brought in to cool property prices being removed,” Roth, head of Asian equity research at ABN Amro Private Banking, said in a phone interview.
“There aren’t enough catalysts to make me positive.” ABN Private Banking manages about 168 billion euros ($218 billion).
Attractive Banks
Soo Hai Lim, a Hong Kong-based fund manager at Baring Asset Management Ltd., says only parts of the market are attractive.
“We need to be more selective on the Singapore market as we find more compelling opportunities in the smaller Southeast Asian markets,” said Lim, whose firm oversees about $60 billion. “Singapore banks are doing OK and offering decent yields. For longer term investors, banks will be a good investment.”
Banks account for the largest proportion of Singapore’s market, with DBS Group Holdings Ltd., Oversea-Chinese Banking Corp. and United Overseas Bank Ltd. comprising more than 30 percent of the gauge.
They are forecast to pay an average 3.3 percent dividend yield for the next 12 months. Singapore’s robust public finances and political stability helped the country keep its AAA credit score at Standard & Poor’s, the ratings company said in May.
Debt Returns
The nation’s sovereign debt has returned 3 percent so far this year, or an annualized rate of 4.4 percent, Bank of America Merrill Lynch index data show. A 4.4 percent gain for the year would be the most since 2011.
The MSCI Singapore Index will climb 8.7 percent during the next 12 months, according to Morgan Stanley projections. Gross-domestic product climbed 2.4 percent in the second quarter from a year earlier, more than economists had forecast.
Garner’s quantitative model ranks Singapore top of 27 markets on factors from valuations to governance and technical indicators.
“There’s been an improvement in the weighting position on Singapore,” said Garner. “In this particular global environment, Singapore does quite well.”
bloomberg.com
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