For investors who Voulez-Vous a market with low volatility, steady returns and no currency risk, Singapore is the market to be in. In contrast, less savvy investors might meet their Waterloo in US tech stocks and cryptocurrencies, with declines of up to 70% in a potential winter. Or, for those waist-deep in China and Hong Kong tech, send out an SOS. Indeed, staying home this year has made investing more than rewarding.
I Have A Dream
This column has often been accused of being overly home-biased since it began in September 2021 for The Edge Singapore’s 1,000th issue. That year, it delivered a total return of 13.6%, including a 3.8% dividend yield, to finish at 3,123.68 points. Modest when compared to the tech rallies from 2019 on the Nasdaq and the first crypto bubble that was emerging. In 2022, a more modest total return of 8.4%, including 4.2% from dividends. In contrast, the FTSE APAC and FTSE Developed World indices dropped 16.7% and 18.3%, respectively.
A crypto winter set in with more than 50% declines and took well over a year to come back with a vengeance, as the Magnificent Seven stocks, with an AI-boosting story, started roaring back from late 2023. With crypto-friendly Trump winning the election in late 2023, this theme was further catalysed, minting Money, Money, Money for Silicon Valley tech venture capitalists and Big Tech CEOs, who repay the favour by sponsoring the new White House Ballroom and Trump family coins.
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That it has only spluttered into incremental new highs for the S&P, Nasdaq and Bitcoin through the year is symptomatic, in part, of the ageing US bull. With the spiralling deficit and economic pain for consumers from tariff flip-flops, the US Federal Reserve could not cut rates as quickly as initially hoped at the start of last year. The pigeons have come to roost, however, as Gimme, Gimme, Gimme policies of benefiting the First Family and tech bros — except Elon Musk.
Amazingly, if one takes a five-year view of equity market performance, our tiny red dot has outperformed major global indices, including the US market. The STI is heading for a robust finish, potentially with a nominal return above 20%, above JP Morgan’s initial 4,500 target and on course for its stretched 6,000-point 2026 call. This builds on the 2024 performance of 16.9% — its best since 2017.
Super Trouper
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At the beginning of this year, Chew On This declared a Lay All Your Love On Me for Singapore stocks. My thesis is that we are still grossly undervalued as a market, especially in the small- and mid-cap (SMID) segments, and that the Equities Market Review Group’s measures and their impact have yet to be factored in. Plenty of long calls are there for the taking, either through market value discovery or a possible privatisation. That we will have an encore performance, potentially trickling down to SMIDs, was met with mostly polite scepticism.
The significance of the Mama Mia initiatives unveiled in February, including the $5 billion market-boosting funds and regulatory changes, took some time to be appreciated, but is now working through the system.
In my column Relight my fire (March 3, Issue 1178), I speculated if the 1993 super bull run is to return, we have to take collective responsibility. Now that the gauntlet was set, we followed up with an analysis of “Money No Enough” — not so much that the $5 billion is insufficient to move the needle, but that there has to be thoughtful deployment and the “animal spirits” of our participants to be awakened.
The preparation was sideswiped by Trump’s Liberation Day tariff announcements in April, lending weight to the naysayers. Fortunately, Taco reversed course as the Chinese rare-earth dragon blew fire from the East in a Knowing Me, Knowing You battle that led to the Chiquitita standoff, which may or may not see Trump visit Beijing next April.
Still, the market refused to believe. It provided deep value opportunities for investors seeking blue-chip trading in the sell-off, and for stocks deeply discounted to their net asset values (NAV), patiently awaiting buyouts. Then came the first $1.1 billion allocation to Avanda Investment Management, Fullerton Fund Management and JP Morgan Asset Management in July. And market participants started to recognise that each of these would raise more funds alongside their allocation, crowding in public or institutional capital by a multiple of that number.
Secondary fundraising began in earnest alongside IPOs. The primary markets started clearing as a long line of hopeful EQDP applicants made their presence felt by joining as anchors and cornerstones, taking up placements. Large fund managers and small niche players alike were seen in Catalist IPOs, hoping to bolster their credentials for pending applications. A trickle-back of funds from the US, along with some animal spirits and speculative fervour, returned, helping some stocks discover more sensible valuations. By early November, with still some larger issues like Ultragreen yet to formally hit the market, Singapore found its way back into the global IPO league tables, even leaving London in the dust.
Some private banks, which traditionally have global mandates in their discretionary portfolio management accounts, saw their incentives for family offices shift from single-digit Singapore mandates to triple-digit ones. Traditional buy-side fund managers began allocating to and beyond primary IPO subscriptions, showed interest in SMIDs, and some with promise started getting noticed and covered by analysts beyond Lim & Tans and PhillipCapital, including CGS International and DBS Group Holdings.
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The flywheel Chew On This talked about last year on the Equities Market Review Group started kicking in. Many SMIDs highlighted in this column have taken off delivering investor payouts in excess of the STI returns. Honey, Honey, this is only just beginning.
The Winner Takes It All
As the first leg of this SMID revival was digested in October and November, with investors taking profits and going on holiday, volumes slowed a tad. Chew On This was blamed by a senior dealer at a bank-linked brokerage for going on holiday from late October, which was said to have caused a market slowdown. Clearly, I have no market impact and was simply being rational by parking myself in the STI and gold ETFs to ride the trends.
This will continue, I suspect, especially from mid-December, with another run to push through 4,600 points on the STI, a strong close before next year, and pre-positioning in low-liquidity markets. Further boost should come from the second batch of $2.85 billion in EQDP funds, to be managed by Amova Asset Management, Eastspring Investments, Lion Global Investors, and others, including BlackRock and Manulife Investment Management, which are supposed to crowd in funds from elsewhere.
For my tactical plan for a pre-holiday allocation, first, I will average up some REITs. I expect the Fed to be forced to cut in December, given softer economic data anticipated after the end of the US government shutdown. Indeed, the market is now predicting an 80% chance of a December cut, up from 30% after November’s Feb meeting. As such, REITs should continue to rise.
Second, our special-situations shortlist, drawn from diligent homework, continues to yield lucky payoffs. Highlighted in this column a few months ago as one to watch, Low Keng Huat on Nov 28 received a privatisation offer from its controlling shareholders at a premium of 8%–17%, depending on the period referenced. Like Frasers Hospitality Trust, Amara Holdings and Grand Venture Technology earlier in the year, I will accept the offer for this jackpot.
The good news for the market, at least, is that there have been as many new issues and rumours of more IPOs as there have been privatisations. I may yet join the occasional new IPO, some for a punt and a run. I am also keeping an eye on certain new listings that are still finding their footing, especially those with business models I am familiar with, such as Coliwoo Holdings or Info-Tech Systems.
The fund managers in the third and last batch of EQDP allocation will be something else for the market to anticipate by June next year. They may indeed include some of our local stalwarts or “old warhorses” that this column has identified before. They will provide additional support alongside the $30-million Value Unlock programme for SMIDs to continue the value-discovery journey.
However, having been lucky enough to spot some gems, at risk of Slipping Through My Fingers soon, I am looking to Take A Chance On old real estate companies trading within their NAVs as the interest rate cycle turns and cap values improve. Several large caps, such as Hongkong Land Holdings, City Developments, and UOL Group, are in the midst of unlocking value. Others could be ripe for divestment and capital recycling, privatisation or a takeout similar to Low Keng Huat. Would the next One of Us be Banyan Tree Holdings, Bukit Sembawang Estates, Tuan Sing Holdings, Singapore Land Group, Wing Tai Holdings and Stamford Land Corporation? There is no certainty, but if the price is right, my answer will no doubt be I Do, I Do, I Do, I Do.
Chew Sutat retired from the Singapore Exchange after 14 years on its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange. He was awarded FOW’s Lifetime Achievement Award
