Thứ Năm, 26 tháng 12, 2013

Schroeders to Julius Baer Avoid Singapore: Southeast Asia

Schroders Plc and Baring Asset

Management Ltd. are avoiding Singapore stocks, the cheapest in

Southeast Asia, as slower economic growth in the region and cuts

to Federal Reserve stimulus drive capital outflows.


The fund managers expect property to lead declines in

Singapore amid a real-estate slump and the prospect of higher

interest rates. The Straits Times Index was the worst-performing

developed market in 2013, dropping 9.5 percent since Fed

Chairman Ben S. Bernanke said in May that bond purchases may be

reduced on signs of sustainable U.S. recovery.


Capital has been fleeing Southeast Asia as investors seek

higher returns in North America. The market value of Singapore

shares fell 5.6 percent to $567 billion this year as of Dec. 23

as 10-year U.S. bond yields climbed to a two-year high in

September, making dividends from the city-state’s real-estate

investment trusts less attractive. The Standard Poor’s 500

Index rose to a record after the Fed announced on Dec. 18 it was

cutting stimulus, citing optimism about the labor market.


“Property companies will do badly, particularly in

Singapore where there’s a perceived housing bubble,” Lee King Fuei, a Singapore-based fund manager at Schroders, which

oversees about $420 billion. “If higher bond yields cause

property prices to fall, there’s an immediate impact on

earnings. Cost pressure on banks will also increase as bond

yields rise.”


The Singapore’s STI traded at 1.38 times book value as of

Dec. 24, according to data compiled by Bloomberg. That compares

with 2.49 for the Philippine’s PSEi Index, 2.37 for Indonesia’s

Jakarta Composite Index, 2.34 for the FTSE Bursa Malaysia KLCI

Index, and 2.07 for the Stock Exchange of Thailand, the data

showed.


Quantitative Easing


The Federal Open Market Committee said after its Dec. 17-18

meeting it will cut its $85 billion in monthly purchases of

Treasuries and mortgage-backed bonds, also known as quantitative

easing, to $75 billion in January.


The central bank will reduce asset buying in $10 billion

increments over the next seven policy meetings before ending the

program in December 2014, according to the median forecast in a

Bloomberg survey of economists on Dec. 19. The STI surged 94

percent from when the Fed lowered its benchmark interest rate in

December 2008 to this year’s peak in May.


Real estate and financial companies account for 47 percent

of the STI, according to data compiled by Bloomberg. Singapore’s

biggest property companies were among the worst performers in

2013, with City Developments Ltd. plunging 25 percent and

CapitaLand Ltd. falling 18 percent. Jardine Cycle Carriage

Ltd. (JCNC)
, an automotive distributor that gets about 89 percent of

sales from Indonesia, fell 27 percent to lead declines on the

benchmark equity gauge.


Slower Growth


The International Monetary Fund lowered its growth target

for Indonesia, Southeast Asia’s biggest economy, to between 5

percent and 5.5 percent this year and next after 6.2 percent

expansion in 2012. Singapore’s GDP is expected to grow 3.9

percent in 2014 after an estimated 3.8 percent rise this year,

according to a quarterly survey released by the Monetary

Authority of Singapore this month.


“Singapore’s neighbors have not been doing so well,

particularly Indonesia, where many of the property buyers in the

city come from,” said Khiem Do, Hong Kong-based head of Asian

multi-asset strategy at Baring Asset Management Ltd., which

oversees about $60 billion. “The Singapore government has also

been implementing tough property measures because they don’t

want housing prices to go through the roof.”


Housing Bubble


Singapore home prices increased at the slowest pace in six

quarters in the three months ended Sept. 30 after the government

introduced new curbs to cool prices in Asia’s second-most

expensive property market.


“There’s no driver to spur investor interest in

Singapore,” Baring’s Do said. “The recent penny stock crash

isn’t really helping the case for investing in Singapore.”


About $6.9 billion was wiped from the market value of three

commodity companies over three days in October, prompting an

investigation by the monetary authority and Singapore Exchange

Ltd. The average value of shares traded daily on SGX in the

three months through December fell to S$1 billion ($790

million), compared with S$1.24 billion a year ago, according to

data compiled by Bloomberg.


Penny Stocks


Blumont Group Ltd., which invests in minerals and energy,

soared more than 1,000 percent this year through the end of

September to lead gains on the FTSE Straits Times All-Share

Index. The stock plunged from an all-time closing high of S$2.45

on Sept. 30 to 7.8 Singapore cents on Dec. 24.


Asiasons Capital Ltd., the second-best performer, slumped

96 percent from its record close of S$2.83 on Oct. 1 through

Dec. 24. LionGold Corp. tumbled 91 percent from its S$1.725 peak

on Aug. 29 after deals to acquire gold assets fell through. The

plunge in shares prompted the bourse to seek approval to

establish circuit breakers to minimize market volatility.


The world economy is primed for its fastest expansion in

four years, with the U.S. driving output gains, economists at

Goldman Sachs Group Inc., Deutsche Bank AG and Morgan Stanley

said this month. Global growth will accelerate at least 3.4

percent in 2014 from less than 3 percent this year as the euro

area recovers from recession and China and other emerging

markets
stabilize.


“Singapore would be one of the markets that would be

favored in Southeast Asia,” said Haren Shah, Singapore-based

chief strategist for Asia-Pacific at Citigroup Inc.’s wealth

management division, which oversees $210 billion. “Singapore,

along with the North Asian markets, is looking cheap and most

likely will benefit as we see recovery in the global economy.”


The Straits Times Index is trading at 14.7 times estimated

earnings, compared with 16 times for the MSCI World Index,

according to data compiled by Bloomberg News.


Trade Falling


Even as the external environment is improving, Singapore is

exporting less to the West, according to Alan Richardson, whose

Samsung Asean Equity Fund outperformed 97 percent of peers

tracked by Bloomberg during the past three years. The city-state

gets about 22 percent of export revenue from the U.S. and Europe

as of November, compared with 37 percent a decade ago, according

to data from International Enterprise Singapore.


“Singapore being a very property- and banking-centric

country means it hasn’t benefited from global economic recovery

because of the government’s tightening policy on the property

market,” Richardson said.


To contact the reporters on this story:

Jonathan Burgos in Singapore at

jburgos4@bloomberg.net;

Jasmine Ng in Singapore at

jng299@bloomberg.net


To contact the editor responsible for this story:

Sarah McDonald at

smcdonald23@bloomberg.net



Schroeders to Julius Baer Avoid Singapore: Southeast Asia

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