It was Singapore’s exceptionalism, buoyed by the benefits of the Pax Americana, with values of multilateralism, the rule of international law and the benefits of globalisation, that propelled us up the S-curve. That was encapsulated in far-sighted and daring policies made by our founding fathers that enabled us to survive the initial post-independence economic and social instability following the withdrawal of the British.
Social cohesion and trust, constructive politics, an industrious workforce and our unique tripartism between labour and capital all contributed to this economic miracle that is now ranked at the top of GDP per capita globally. Our undisclosed financial reserves held us steady during the pandemic’s rainy days. The income from investing now contributes a significant portion of our annual budget and provides assurance for the future, if we are not swayed by seductive populist pressures to open the taps of our reserves.
In a 60-year complete cycle of the Chinese Zodiac, we have indeed gone from Third World to First, however improbable the odds of our economic miracle would have been in 1965, through the oil shocks of the 70s, the 1980s global recession, the Asian Financial Crisis in the late 90s, followed by the Global Financial Crisis post-Lehman. We have ridden many S-curves and built ourselves out of it with the MRT system in the 1980s, our continuous transformation not just of our skyline with the iconic Marina Bay Sands, but also of our infrastructure and transport hubs, keeping us efficient, effective and connected even if our relative cost vis a vis our neighbours stays at a premium.
There is even talk of Singdollar parity with a weakening US dollar, whose reserve currency status is gradually being questioned in an increasingly multipolar world, with smaller gardens and higher fences looking to wean themselves from dependency on US markets, capital or assets.
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Our Straits Times Index (STI) for good measure has hit an all-time high just before National Day, compounding on last year’s 23.5% total return with almost 15% nominal return. Outperforming the US markets both nominally and in absolute terms, the Singapore dollar (SGD) has strengthened despite falling domestic interest rates. Thilan Wickramasinghe of Maybank Securities describes the STI as “baby bull”. If so, we are not on the mature end of the S-curve yet.
Solidarity required
Capital continues to be drawn to or be managed out of Singapore. We are lucky, but have to continue to make our own luck. The timely equity market review by the Monetary Authority of Singapore last year and initial steps rolled out since February no doubt contributed to our local market revival. There will be more to come, including investor protections, as we shift the regulatory paradigm towards a true disclosure-based system as was intended back in the 1999 reforms. But we too need to have our own belief and back our own local champions, not just as individual investors, but institutionally allocate private and public savings to our capital markets more sustainably beyond the initial $5 billion deployment.
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Quo vadis the next 60 years? For Singapore to continue to thrive, we have to continue to be exceptional beyond financial and material resilience. We must maintain solidarity in social resilience and cohesion. In a world increasingly polarised through fault lines in race, religion, identity politics and more, where individual rights are often asserted over and above community common sense in the West, we must continue to differentiate ourselves by finding more common ground and areas of alignment.
For instance, to avoid adversarial conflict even between investors and issuers, where possible, even if the regime for civil class actions may become more permissive as part of the equity review later this year. For the Securities Investors Association Singapore (Sias), its mantra, for instance, has been to resolve issues where possible in the boardroom and not the courtroom. To do so, we must be innovative and creative to drive growth and performance, but continue to build trust by being honest, reliable, and accountable in our disclosure and governance.
All parts of our market ecosystem — brokers, investment bankers and investors — have to play their part and be self-reliant and responsible for their own choices. Business failures due to the laws of the jungle in global competition, or bad economic judgment, should not automatically be deemed nefarious, or else no boards or management will want to undertake risks to grow or create value. Investors who make bad decisions should not automatically run to the authorities for a backstop to complain. For our stock market to be mature beyond these levels, to be exceptional, we too must be resilient, innovative and responsible ourselves.
Is the summer pause over?
Last month, Chew On This (Issue 1199, July 28) was convinced that markets were getting a tad hot in the summer. And it was ok to take a pause on the STI then, despite banking and broking analysts scrambling to upgrade their index targets after it traded through 4-4200 levels. After making the highs intraday at 4,300 twice in late July and early August, technical chartists are now calling for a corrective phase for the index.
Coincidentally, this coincided with the corporate reporting season. We expect the three banks, which weigh almost half the index, that had previously carried the STI to all-time highs to have largely run their course, with only DBS Group Holdings marking a new high above $50. It has since corrected together with United Overseas Bank and Oversea-Chinese Banking Corp, easing a tad like the local August bill yield, which marked a new multi-year low at 1.59%.
Perhaps sometime into the belated start of the lunar seventh month this year, from Aug 23, there will be a time to repurchase the STI exchange-traded funds at a more attractive rate for the overall secular bull market in Singapore that is still intact.
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Our call to weigh in on REITs continued to accrete well, as despite many going ex-dividend with annualised yields from 5% to 8% per annum, the REIT exchange-traded funds, as well as most individual REITs, are trading higher from July levels. They not only played their part being defensive as the earnings season created some volatility in individual large and mid-cap stocks that had run ahead of themselves; they continue to benefit from the perception that global rates from an increasingly under pressure the US Federal Reserve may be cut in September. I am using the opportunity to recycle and invest in higher-quality REITs as valuations improve across the board.
The S-trade
Our old favourites cheered on in Chew On This periodically last year — “the S-trade” had left me far behind after having taken profit on the way up too early. I missed the sharp final run-ups after-market momentum built up from 2Q2025 and accelerated in July to August.
These include Singapore Telecommunications (Singtel), Singapore Technologies Engineering (ST Engineering), Sembcorp Industries, Sats and Seatrium. Sembcorp’s revival, which we had remarked on since this column started in late 2022, had run up from 2024’s $4.64 to $7.80 before a revenue miss from over-enthusiastic analysts’ expectations saw it reverse spectacularly down 20% to $6.15 in a week. It now looks compelling again and I am glad I have cash on the side to wade in.
ST Engineering, which was spotted as undervalued last year, stuck below $4 in an era where defence stocks globally were doing well as a sector, more than doubling, almost touching $9.00. A good set of results, however, was not good enough as it lost nearly 7% to $8.40. Now at well over 30 times P/E, I still am not in a hurry.
Singtel, which languished below $2.40 in mid-2024, was well within the sum of its parts, closer to at least $4, and had indeed reached $4.18 by July this year. A correction pre results to $3.88 and once again beating expectations saw it back above $4.10, at a mid-teens P/E and 4%-plus dividend yield, I am kicking myself for missing the opportunity to buy back, albeit it was a shallow correction.
Two turnaround stories and emerging global champions, Seatrium and Sats, look compelling, off their 2025 highs of $2.60 and $4, respectively. I have started allocating. If they continue to execute well, apart from global investors, they could be beneficiaries of the Equity Market Development Programme allocations.
Emerging Ss
This last month, I have gotten lucky. My mid-year homework identified a few undervalued mid- and small-cap stocks with low P/Es, based on published announcements of potential significant growth prospects. We talked about Soilbuild Construction Group in issues 1199 and 1201 when it was just over $1, then just above $1.40. The construction sector looked cyclically promising, whether it is the airport’s Terminal 5, our megaport at Tuas, or accelerating HDB builds, there is periodic news of contract awards.
SoilBuild’s post-National Day 1HFY2025 earnings of 17.1 cents per share exceeded last year’s 16 cents full year. Rising revenue came on the back of increasing margins, with larger project size wins presenting operating leverage gains. In addition, the results presentation referred to comparative advantage in sustainability and innovation and a $1.2 billion order book. Yik Ban Chong of Philip Securities, who previously had a 97 cents target price together with his call to “accumulate”, on Aug 15 raised his call to “buy” along with an auspicious target price of $2.68, based on its historical 5.9 times P/E for FY2026.
I am not sure why a growth stock warrants a mid-single-digit P/E benchmark, when other contractors listed, including Wee Hur Holdings, are already trading at above 10 times. Perhaps, as it had already pared down debt, there may also be prospects of much higher dividend payouts, going by historical 30% standards. At $1.99 close the week after its results announcements, Soilbuild may still be on the steeper end of its own S-curve if management continues to deliver. I am just glad I got in for the ride.
Chew Sutat retired from the Singapore Exchange after 14 years as a member of 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. He serves as chairman of the Community Chest Singapore
