over 3 years ago • 2 mins
Singapore’s biggest stocks may have fallen 20% this year – but according to investment bank Morgan Stanley, the Southeast Asian city-state’s shares could prove a potent cocktail in the coming months 🍹
The MSCI Singapore Index tracks the stock prices of the top 25 companies listed on the Singapore stock exchange, together accounting for 85% of the local market’s total value. Reflecting the makeup of the Singaporean economy, almost half the index’s value comes from financial companies, with real estate firms accounting for 20%.
Following an impressive initial comeback from the last financial crisis, Singaporean stocks have had a mixed few years. And after performing just half as well as the MSCI World Index of global stocks in 2019, 2020 has been a shocker. In contrast to the rapid recovery of, say, big US companies’ share prices, the MSCI Singapore remains 23% below where it started the year.
But a report from Morgan Stanley late last week suggests that things can only get better. Rising economic and geopolitical uncertainty elsewhere in Southeast Asia – most notably in the rival financial hub of Hong Kong – have coincided with a big inflow of money to Singapore, which may be seen as a “safe haven” in troubled times 🕊️
In calling the bottom for Singapore’s stocks, Morgan Stanley thinks investors can expect up to 14% returns over the next 12 months. Cash hasn’t just been flowing into the local bank accounts of the super-rich recently; Singapore’s stock market is a major hub for international real estate investment trusts (REITs), and their relatively high dividends are attracting attention from investors.
Such strong and sustainable dividends are seen as a hallmark of Singaporean stocks overall – and particularly of those companies which stand to benefit from a strong economic recovery. Morgan Stanley points to the likes of local lender United Overseas Bank and industrial landlord Ascendas REIT on this score 👈
For those looking to keep things simple, however, an investment in the *i*Shares MSCI Singapore ETF offers an easy way to track the entire index’s value – which, if Morgan Stanley’s right, should soon be headed up…
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