Madonna’s True Blue was the best-selling album of 1986. Some 25 million copies — including my cassette tape — were sold. Five songs from this album topped the Billboard Hot 100 and stayed on the charts for 82 weeks. In the final track Love Makes the World Go Round, Madonna sung:
“Make love, not war,” we say
It’s easy to recite
But it don’t mean a damn
Unless we’re gonna fight
The words of this song gave spine to foolish bravado. “There’s hunger everywhere” tugged at hearts and the injustice of “pain and prejudice” riled feelings.
Tectonic shifts were taking place in global allegiances and the economy. The savings and loan crisis in the US ultimately led to 1987’s Black Monday. Here in Singapore, the Pan Electric crisis shut our stock market for three days. The country was suffering from its first post-independence recession.
But on our La Isla Bonita, paddling a canoe on East Coast beach and hanging out overnight at a nearby barbecue pit, these events were but a series of distant headlines. For me, it was the age of innocence. I was less affected by these reverberations and more consumed by puppy love. I was 14, after all.
Through the sheer grit of our Pioneer and Merdeka generations, we literally dug our way out of the 1985 downturn with the construction of the MRT. We tried our hand with the tech industry and became a global manufacturing centre of disk drives thanks to the likes of HP and Seagate, respectively. A network of local suppliers and contractors bloomed as gutsy entrepreneurs set up the likes of Omni Industries and Natsteel Electronics, which were later bought out at a nice premium. Venture Corp, another stalwart from that era, remains a component stock of the Straits Times Index (STI).
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In recent years, instead of asking Where’s the Party, we have brought the party here. Singapore was reinvented over the generations with F1 and the upcoming Shangri-La Dialogue. We have Lived to Tell this SG60 only by Open Your Heart to international investment and overseas talent. By growing the economic pie bigger and creating more PMET jobs, more Singaporeans will benefit and there is nothing to get too Hung Up about.
This is the story of my Singapore, and to the sceptics, I believe this is the story of our market, too, provided we continue to adapt. The numbers tell a story. Although belated, the 25% re-rating of the STI has brought us to a new all-time high this year. Yet, the “kids” are still punting on US markets in correction mode as they nervously average down their Teslas and Nvidias.
That Tesla trades at just half its peak price after the “Trump Bump” is not surprising, given the inverse proportion in brand value and international Tesla sales to the prominence of Elon Musk’s DOGE role. The Nvidia cold, meanwhile, is blamed on Chinese DeepSeek’s shocking unveiling on Jan 20 — the day of President Donald Trump’s inauguration.
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The fact that the S&P is in correction mode, trading below the 200-day moving average for the first time since October 2023, and that the Nasdaq has now fallen below already inflated pre-US election levels should not surprise readers.
Borderline
At the start of the year, Chew On This postulated a few theories. While ostensibly pro-growth, as suggested by lower corporate taxes, Trump’s policies may keep the animal spirits among his bros happy for a while. However, given his mercurial nature, those enjoying the ride should fasten their seatbelts because of the turbulence to come.
We were directionally right but underestimated the extent of the reality show his administration has put up, where uncertainty and tariffs galore have dismayed the bulls on Wall Street and his crypto bros alike — look at how Bitcoin has given up its gains despite the attention from the White House. Trump is now asking Maga supporters to buy Teslas to stem flagging domestic sales.
Treasury Secretary Scott Bessent declared that reducing long-term interest rates was his focus. He got his wish perhaps quicker than he expected. US 10-year bonds now trade at 4.27%, below the Fed Funds Rate (FFR) of 4.33%. In other words, the yield curve (at least in the mid- and not the 30-year) has inverted, signalling fears of a recession.
In Singapore, the latest six-month T-bills are down to 2.56%. This level was last seen in July 2022, when the FFR hovered between 1.5% and 1.75%. No, I am not suggesting that the ample liquidity in the Singapore banking market (potentially a signal of slower loan demand with all the economic uncertainty) is a harbinger for the Fed to cut so aggressively. With the fears of Trumpflation, markets are now expecting just one cut this year versus two to three when Trump won.
A week, as they say, is a long time in politics. Central bankers are generally known to be data-following cool cucumbers. But as numbers from these last two months have shown, there are underlying risks to the US economy, no thanks to job and business expenditure cuts by DOGE, contradicting the billions of dollars of spending in wafer fabs and other flashy projects promised by the US and global CEOs as gifts to Trump.
Assuming these investments are real and finally materialised, the time to build a fab in the US is 38 months. In contrast, a similar facility in Taiwan will take just half as long to build, and in Singapore, just one year, thanks to EDB. What this means for the US is that it will take a long time for jobs to be created. The Trump transition could be very painful, and my suggestion that Trumpflation could be deflationary is now getting a following.
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Ray Of Light
For long-suffering local REIT investors, this has translated to more than a 5% rebound in our local REIT index last week. With six-month T-bill rates almost equivalent to CPF Ordinary Account, more money will flee this previously popular asset class. On the other hand, there is an upside for many of the REITs and popular companies, given the massive discounts to NAVs that they are at. As they come back in Vogue, our thesis of buy value and discounts for jackpots from M&A or re-rating may have started.
It could be a Celebration to come for myself and other investors, carrying the mark to markets down and collecting dividends. Boring is starting to be beautiful again. REITs and business trusts such as Keppel REIT, Frasers Logistics Trust and NetLink NBN Trust have enjoyed 5%–10% rebounds from their ex-dividend sell-down. Following Paragon REIT, it may not be a surprise if another REIT privatisation is announced in the weeks ahead, given how long-term rates are coming down, which makes it easier to price and fund such acquisitions.
Dress You Up
Aside from that, it is worth noting that as US markets deflate and US exceptionalism “pauses”, others have started to crank up. For one, we expected China to do well this year. Indeed, the Year of the Snake has begun with a bang instead of a hiss, with Chinese tech stocks now deeply sought after — pun intended.
As its indices have run, it is worthwhile to look again at well-managed Chinese REITs listed here for yield and asset plays: both CapitaLand China Trust and Sasseur REIT have recovered from their recent lows. Already, Yangzijiang Financial Holding — a counter we highlighted when it was clearing through 50 cents — has almost doubled from its price half a year ago. It is now stirring investors’ expectations with a potential spin-off, and for now, at 66 cents, it is still a considerable discount to its NAV of $1.19 NAV.
Now that America is more interested in acquiring Greenland than funding Nato, Europe is forced to look after itself. Re-armament and the necessary increase in expenditure beyond traditional fiscal breaks by member states are leading to a broad-based revival of European stocks. Defence stocks like Rheinmetall are pushing aside Nova Nordisk as the ones to be in focus. This general awakening might be the impetus for European REITs listed here — the likes of Stoneweg REIT and IREIT Global — to be revived, especially given that they are trading at nearly half NAVs.
Take A Bow?
Now, there is another stock trading at around half its NAV or even deeper if measured against its R(eal)NAV: City Developments, which has been in the news of late due to the unfortunate public airing of a boardroom cum family split.
One faction alleged corporate governance failures when two new independent directors were appointed without going through the nominating committee, while the other faction cited some undue influence. Both sides lawyered up and were ready for a courtroom brawl.
Cooler heads eventually prevailed as parties involved walked back to focus on the interests of the company and shareholders. Hopefully, this will not distract management and will be a catalyst for some value creation in this sprawling real estate and hospitality group.
Amid the dramatic back and forth, many had jumped quickly to the conclusion that there must be something nefarious going on with the serious allegations of governance. I wasn’t entirely sure what rules were breached as the board majority approved the appointments. It may seem ironic, but on the one hand, investors have long complained about the domination of strongman founder/chairman figures in listed companies getting their way unchallenged by rubber-stamping independent directors. On the other, many of these investors continue to bet on the Midas touch of these business honchos.
In this case, from a neutral standpoint, that the majority of the board acted legally in the company’s interest without the agreement of the executive chairman isn’t necessarily bad governance per se — if it was meant to address the internal matters of influence as it seems to have played out.
In fact, with the rapid settlement of the matter and transparent and timely disclosures over what must be a heart-rending matter for some of the parties involved, it may be interesting to see anyone Takes a Bow at the coming AGM on April 23.
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
