Singapore Stocks at Cheapest in Decade Can't Tempt Samsung Asset

  • Singapore's Straits Times Index enters bear market after drop
  • Commodities trader Noble Group leads slump in this year

It’s too soon to bet on a rebound for Singapore stocks, according to Samsung Asset Management Ltd., which sees little value in the shares even at the widest discount to global equities in more than a decade.

The benchmark Straits Times Index is poised for a 16 percent slide this quarter, the most since the throes of the global financial crisis in 2008. The gauge entered a bear market on Monday after falling 21 percent since its April peak, while the MSCI Singapore Index is already in one. Faltering growth in China and the prospect of higher U.S. interest rates leave shares vulnerable to more losses, according to Alan Richardson, a money manager at Samsung Asset whose Southeast Asian equity fund has beaten 96 percent of peers over five years.

“The growth outlook for Singapore is generally weak due to China’s deepening slowdown,” Richardson said. “The weakness of commodity prices also had a negative impact on the economy as well as commodity suppliers like Noble Group. Stocks could remain at depressed levels for the next six to 12 months unless we see an improvement in these factors.”

Weaker Data

The Straits Times Index fell 1.4 percent to the lowest in more than three years at the Singapore close after a report showed China’s industrial profits declined 8.8 percent last month from a year earlier. Singapore’s industrial production sank 7 percent year-on-year in August, figures showed last week, after reports this month on retail sales and exports also missed estimates. China is Singapore’s biggest trading partner.

Singapore stocks are heading for a fifth monthly decline, the longest losing streak since November 2008. Commodities trader Noble Group Ltd. is the Straits Times Index’s worst performer this year, while Golden Agri-Resources Ltd. is also down more than 30 percent.

“The concern is how much impact China’s economic slowdown and the slump in commodity prices would have,” Mixo Das, a strategist at Nomura Holdings Inc. in Singapore, said by phone. “Singapore has a big exposure to commodities and that doesn’t help the market.”

A private Chinese manufacturing gauge fell to the lowest in 6 1/2 years, a report showed last week. The nation’s declining appetite for energy, metals and other resources will hurt commodity-focused export economies, the Asian Development Bank said on Sept. 22.

Staying Optimistic

Morgan Stanley is staying optimistic. The city-state is its most preferred market in Southeast Asia, Hozefa Topiwalla, a Singapore-based strategist, wrote in a Sept. 14 report, citing low valuations and attractive dividend yields. Shares on the Straits Times Index offer investors a forecast dividend yield of 4.2 percent, compared with 2.9 percent for the MSCI All-Country World Index, data compiled by Bloomberg show.

The MSCI Singapore Index trades at 1.1 times the value of its companies’ net assets, compared with a multiple of 1.9 on a measure of global equities. The gap between the two widened last month to the most since February 2004.

Benchmark gauges for Malaysia, Thailand, Vietnam and Indonesia trade at a price-book ratio of at least 1.6, data compiled by Bloomberg show. While Singaporean stocks fared worse this quarter than most neighboring markets, all the equity measures are down as the Federal Reserve’s plan to raise interest rates spurs investors to pull cash out of emerging assets.

“In terms of valuations, the Singapore market looks oversold,” Kelvin Tay, chief investment officer for Southern Asia-Pacific at UBS Group AG’s wealth management unit in Singapore, said by phone. “It should be due for a technical rebound but for that to actually happen, you need this region to actually improve. Singapore is viewed as part of the Asean region and Asean is struggling at this point.”

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