Singapore’s export-driven economy is among the most vulnerable in the ongoing U.S.-China trade conflict, but major investors said its stock market could deliver attractive returns this year.
“It’s very attractive and that’s one of the reasons why we’re actually overweight Singapore relative to other Asian equities,” Kelvin Tay, regional chief investment officer at UBS Global Wealth Management, said on Monday.
Tay told clients at the UBS Wealth Insights forum that the bank actually has a bearish outlook on the Singapore economy. The bank expects the country’s gross domestic product to grow by 2 percent in 2019, down from last year’s estimated 3.3 percent and at the lower end of official forecast of 1.5 percent to 3.5 percent.
Singapore, a tiny but wealthy Southeast Asian country, relies heavily on exports to power its economy. Its exports of goods and services in 2017 were close to 200 percent of its roughly $300 billion GDP — among the highest globally, according to the World Bank.
The country’s benchmark Straits Times Index didn’t escape the global sell-off last year, shedding 9.8 percent throughout 2018. But, the index held up better than its trade-dependent north Asian peers and Singapore shares are still “cheap,” said Tay.
In addition, in an environment where economic expansion and corporate earnings growth are slowing, listed companies that can maintain the ability to pay dividends to investors are good buys, strategists said.
“Dividend is going to be a very important element for investors in 2019 ... on that, Singapore ranks high,” Ken Peng, head of Asia investment strategy at Citi Private Bank, told reporters on Tuesday.
Peng said the bank likes Singapore lenders — a view shared by investment bank Jefferies, which has a “buy” rating for DBS Group Holdings, Oversea-Chinese Banking Corp and United Overseas Bank.
Krishna Guha, equity analyst at Jefferies, wrote in a note last week that the three Singapore banks have the potential to continue growing their capital and that may result in higher dividend payouts. That’s one of the reasons that make the lenders an attractive investment option, Guha said.
“Notwithstanding uncertain macro conditions, Singapore banks, in our view, are sheltered by a combination of inexpensive valuation, growing payout and diverse levers to sustain earnings growth. Valuations are in the low range of historical bands and attractive regionally,” he wrote.
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