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Thursday, 5 March 2009
Singapore May Be Followed In Race To The Bottom
Singapore’s Straits Times Index is the only index in the Asia ex-Japan group now trading below its October 2008 trough. But with other economies in the region faring at least as badly as Singapore, if not worse, that looks somewhat unfair.
SINGAPORE (Dow Jones) - Singapore’s Straits Times Index is the only index in the Asia ex-Japan group now trading below its October 2008 trough. But with other economies in the region faring at least as badly as Singapore, if not worse, that looks somewhat unfair.
The upshot is either that Singapore has been oversold or that other Asian markets still have further to fall; unfortunately, it could well turn out to be the latter.
Daiwa strategist Mun Hon Tham is tipping just such a scenario; “given the deterioration in the outlook for equities globally, we think Asia ex-Japan markets may not stay above their October 2008 lows.”
Singapore has found itself out in the cold with investors within Asia, partly because they see its export-reliant, open economy as being vulnerable to the global economic slowdown.
Then again, so are the economies of South Korea and Taiwan, and a host of other places in the region. But while the STI languishes, other Asian markets remain some way above their previous troughs.
UBS strategist Min Lan Tan notes that while Singapor’s gross domestic product fell 4.5% on-quarter in the fourth quarter, Korea, Taiwan and Thailand all saw larger declines
Tan says investors are ignoring the fact that Singapore’s export base is far more diversified than in the past.
Some analysts have also pointed to a spate of rights issues by blue-chip companies in Singapore of late, with investors worried about further cash calls. But Tan believes Singapore companies may simply be ahead of the curve on the capital raising front, with regional peers likely to follow suit soon.
What’s more, Singapore has also seen less severe earnings cuts than other markets.
According to Credit Suisse, Singapore’s consensus earnings for 2009 have been cut by 10% year-to-date, against a 16% downgrade for the region. The broker says Taiwan and Korea have seen the most significant consensus earnings cuts regionally.
CIMB meanwhile, says that Hong Kong and Indonesia, which are only just starting to see companies report their fourth quarter numbers, are likely to experience significant earnings downgrades; “the shoe has yet to drop for the Hong Kong and Indonesia markets in terms of their near-term earnings projections.”
Another inconsistency is that Singapore banks have been behind much of the STI’s underperformance, with all three banking heavyweights currently well below their October troughs.
This is despite the fact they are consistently ranked among the world’s safest banks in terms of credit quality, unlike their peers around the region.
Sadly though for the Singapore market, it’s unlikely to be a case of it now rising to keep pace with its regional peers. Rather, Asia seems more likely to come down to meet Singapore.
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Singapore May Be Followed In Race To The Bottom
By Kirsty Green
5 March 2009
SINGAPORE (Dow Jones) - Singapore’s Straits Times Index is the only index in the Asia ex-Japan group now trading below its October 2008 trough. But with other economies in the region faring at least as badly as Singapore, if not worse, that looks somewhat unfair.
The upshot is either that Singapore has been oversold or that other Asian markets still have further to fall; unfortunately, it could well turn out to be the latter.
Daiwa strategist Mun Hon Tham is tipping just such a scenario; “given the deterioration in the outlook for equities globally, we think Asia ex-Japan markets may not stay above their October 2008 lows.”
Singapore has found itself out in the cold with investors within Asia, partly because they see its export-reliant, open economy as being vulnerable to the global economic slowdown.
Then again, so are the economies of South Korea and Taiwan, and a host of other places in the region. But while the STI languishes, other Asian markets remain some way above their previous troughs.
UBS strategist Min Lan Tan notes that while Singapor’s gross domestic product fell 4.5% on-quarter in the fourth quarter, Korea, Taiwan and Thailand all saw larger declines
Tan says investors are ignoring the fact that Singapore’s export base is far more diversified than in the past.
Some analysts have also pointed to a spate of rights issues by blue-chip companies in Singapore of late, with investors worried about further cash calls. But Tan believes Singapore companies may simply be ahead of the curve on the capital raising front, with regional peers likely to follow
suit soon.
What’s more, Singapore has also seen less severe earnings cuts than other markets.
According to Credit Suisse, Singapore’s consensus earnings for 2009 have been cut by 10% year-to-date, against a 16% downgrade for the region. The broker says Taiwan and Korea have seen the most significant consensus earnings cuts regionally.
CIMB meanwhile, says that Hong Kong and Indonesia, which are only just starting to see companies report their fourth quarter numbers, are likely to experience significant earnings downgrades; “the shoe has yet to drop for the Hong Kong and Indonesia markets in terms of their near-term earnings projections.”
Another inconsistency is that Singapore banks have been behind much of the STI’s underperformance, with all three banking heavyweights currently well below their October troughs.
This is despite the fact they are consistently ranked among the world’s safest banks in terms of credit quality, unlike their peers around the region.
Sadly though for the Singapore market, it’s unlikely to be a case of it now rising to keep pace with its regional peers. Rather, Asia seems more likely to come down to meet Singapore.
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