It was a full house at The Edge Singapore’s Year-End Investment Forum on Nov 30 at SGX Auditorium, which saw a lively discussion by panellists Isaac Lim, chief market strategist, Moomoo Singapore; Gerard Soosay, CEO, Sunway Iskandar; Geoff Howie, market strategist, Singapore Exchange S68 (SGX); and Kelvin Tay, chief investment officer, South Asia-Pacific at UBS Global Wealth Management.
Tay had a sobering message for Singapore and Southeast Asia. According to him, it isn’t recession but hyperinflation we should be worried about during Trump 2.0. “You’ve got corporate tax rates down to 15%. That should boost earnings growth by anywhere between 11% to 15% since the tax burden is lowered. The inflationary aspect comes from the fact that you impose tariffs on all these companies in the US,” he points out.
Prices go up because supply cannot increase in the short term. A 15% tax rate in the US could make it an attractive manufacturing jurisdiction from a tax perspective. “Maybe companies shouldn’t move to Vietnam. Perhaps companies should move to the US,” Tay jokes. In the US, land is plentiful. However, with curbs on immigration, would labour be cheap and plentiful? “But if I’m saving 10% of my corporate tax rate here, why not?” suggests Tay.
That brought the discussion back to Singapore, which is not cheap. Land and labour are more expensive here than anywhere else in Asean.
Sunway’s Soosay noted that HDB flats in Singapore are more expensive than landed properties, such as the semi-detached houses in Sunway City Iskandar Puteri (SCIP). Sunway Group has employed its own police and security officers to patrol SCIP to alleviate Johor’s security issues. The build-out of transport infrastructure in Johor will also see the Rapid Transit System (RTS) up and running by the end of next year. In addition to the RTS, Malaysia has its own Electric Train Service (ETS) that will open a station in Johor Sentral near the CIQ in Johor Bahru sometime in 2025. The ETS will start in JB and run to Malacca, Kuala Lumpur and Taiping, to as far north as Padang Besar near the border with Thailand.
“We have a well-stabilised government. From the private sector, we see a lot of improvements. We have a finance minister who is very investor-friendly. The government has also announced a lot of incentives that will be coming up in the Johor-Singapore Special Economic Zone (JS-SEZ),” says Soosay. Additionally, small businesses will have tax incentives in parts of the SEZ, he adds.
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In Lim’s view, Trump 2.0 will likely be good for local banks. “The winners will definitely be the financials in light of the whole interest rate story. The banks are still very strong in terms of relative performance compared to the Straits Times Index. I still think Singapore Telecommunications Z74 [Singtel] will be a winner because it has its whole game plan lined up.”
On the other hand, Lim adds that entities related to fixed income, such as REITs or infrastructure trusts, are likely to be invested in for yield rather than capital appreciation. When interest rates rise, the price of REITs and bonds usually declines because they have to provide higher yields to compensate for higher risk-free rates.
Tay concurs with Lim on the banks. Rates are high enough for the banks’ net interest margins to expand and yet attractive enough for people and companies to continue to borrow, buy properties or fund their business activities. “And the Singapore banks have pretty strong balance sheets as well,” Tay says.
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While banks definitely benefit from the so-called Trump trade, and REITs are less likely to benefit, where does ESG stand?
“The ESG theme comes in ebbs and flows, and with Donald Trump coming in as president, it’s definitely going to be a bit more out of favour, especially in the US,” Lim says “During the past quarter, we’ve noticed ESG theme companies falling out of favour,” he adds.
However, traditional utilities, including nuclear power and other forms of energy, are likely to be attractive despite their strong rallies. “The Nordic countries, like Denmark and Norway, are very big on renewables. Investors can get some exposure for renewables growth in the right companies in these smaller countries,” Lim points out. “The E part of ESG is not going to be coming back for the next four years.” However, as part of the artificial intelligence value chain, utilities, nuclear power and renewables will likely attract renewed attention as AI is an energy guzzler.
According to Soosay, Sunway’s founder is committed to sustainability, as is the whole group.
“We were committed to sustainability. It starts with ourselves and our children in education. We have special curriculum activities in schools, including our own, to educate the children about sustainability,” Soosay says.
SCIP has Big Box mall. “In 2019, we installed 3MW of solar panels in Big Box. Although we were adversely affected by Covid, we persisted. Now, we are at net zero because we’re using solar panels for our malls. We won’t stop here. We will keep doing more,” Soosay adds.
For Howie, local companies reducing their carbon footprint have done very well in recent years. As a case in point, Sembcorp Industries U96 is up 400% in the last five years, Howie points out. “There are several companies that are at the forefront of making all our lives easier in terms of providing sustainable solutions over the next five to 10 years. Sembcorp is looking to grow its renewables capacity from 10GW to 25GW in 2028,” Howie says.
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When asked about the outlook for “overlooked” mid-cap stocks, Howie pointed to The Edge Singapore’s Billion Dollar Club (BDC) Awards. “There’s a big contingent of smaller, mid-cap stocks that need more attention. Some of these stocks are amazing. They’ve been in Singapore for a good 40 to 60 years, and in some cases employing a lot of Singaporeans and integral to our economy,” Howie says.
As to which stocks to look at, he referred to the BDC awards, which have a Centurion Club section for stocks with market capitalisations under $1 billion. These stocks are ranked according to their return on equity (ROE), profit after tax and total shareholder returns. Companies such as Cortina C41
Holdings, Hafary 5VS
Holdings, Samudera Shipping Lines, Sing Investment & Finance, Isec Healthcare, Azeus System Holdings and Aztech Global 8AZ
were some of the award winners this year in the Centurion sector of the BDC.
Elsewhere, Lim and Tay believe that bitcoin will continue to trend higher and both believe some bitcoin should be part of a diversified portfolio. Overall, the speakers at the forum also highlighted that the Straits Times Index (STI) is one of the best performers this year. For the year to Dec 2, only the Taiwan Stock Exchange Index did better, up a tad below 30% compared to the STI’s 22% gain.
Read more about The Edge Singapore’s Year-End Investment Forum:
