SINGAPORE (Dow Jones) – Singapore stocks may be cheap, but they’re probably still not cheap enough.
The global economic slowdown hasn’t taken the same toll on Singapore’s share prices as the Asian financial crisis of a decade ago. But the reading from the city-state’s economy suggests more damage is yet to come.
While the Straits Times Index (STI) has had a rough ride in 2008, falling 53% to 1653 since the start of the year, its drop from peak to trough is still less than the retracement seen in 1997-98. A repetition would see a fall to around the 1240 level.
Some analysts think Singapore may have a tougher test this time around than in previous downturns. “The current hit to the economy is more broad-based than any of the four external shocks that have hit Singapore since the mid-1990s,” warns Macquarie economist Rajeev Malik in a report.
Malik says this downturn may be worse than 1997-98, the technology bust of 2000, SARS in 2003 or the tsunami shock of 2004, because this time around no sector of the economy will be spared.
The global slowdown is hitting all segments of Singapore’s export-led economy. Foreign demand has slumped, the falling oil price is hitting offshore & marine activities, and the stalled financial services sector is bad news for jobs and the property market.
The Singapore market is currently trading on a historically cheap 2009 price/earnings ratio of around 9 times. That’s below the 13 times PE multiple during SARS and the 11 times multiple during the Asian financial crisis.
But further cuts in earnings forecasts would seem more likely than not given that Singapore is only at the start of what could be a deep and prolonged recession. And, unfortunately, a falling “E” is usually accompanied by a falling “P.”
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Singapore Market May Face Rougher Ride Than 97-98
By Kirsty Green
26 November 2008
SINGAPORE (Dow Jones) – Singapore stocks may be cheap, but they’re probably still not cheap enough.
The global economic slowdown hasn’t taken the same toll on Singapore’s share prices as the Asian financial crisis of a decade ago. But the reading from the city-state’s economy suggests more damage is yet to come.
While the Straits Times Index (STI) has had a rough ride in 2008, falling 53% to 1653 since the start of the year, its drop from peak to trough is still less than the retracement seen in 1997-98. A repetition would see a fall to around the 1240 level.
Some analysts think Singapore may have a tougher test this time around than in previous downturns. “The current hit to the economy is more broad-based than any of the four external shocks that have hit Singapore since the mid-1990s,” warns Macquarie economist Rajeev Malik in a report.
Malik says this downturn may be worse than 1997-98, the technology bust of 2000, SARS in 2003 or the tsunami shock of 2004, because this time around no sector of the economy will be spared.
The global slowdown is hitting all segments of Singapore’s export-led economy. Foreign demand has slumped, the falling oil price is hitting offshore & marine activities, and the stalled financial services sector is bad news for jobs and the property market.
The Singapore market is currently trading on a historically cheap 2009 price/earnings ratio of around 9 times. That’s below the 13 times PE multiple during SARS and the 11 times multiple during the Asian financial crisis.
But further cuts in earnings forecasts would seem more likely than not given that Singapore is only at the start of what could be a deep and prolonged recession. And, unfortunately, a falling “E” is usually accompanied by a falling “P.”
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