Morgan Stanley is optimistic about Singapore shares and expects the MSCI Singapore index to yield up to 14% over the next 12 months.
In fact, investors can increasingly see Singapore as a safe place to invest as uncertainty worries the region, the investment bank said.
“We could see an influx supported by Singapore’s growing perception of safe haven amid geopolitical and economic uncertainty in the region,” analysts Wilson Ng and Derek Chang wrote in a report last week.
Covid-19 destroys the economy around the world, and the countries of the Asia-Pacific region are not spared.
Singapore, a wealthy urban state in the region, has unveiled one of the most generous measures to support its economy – four stimulus packages worth 100 billion Singapore dollars, or almost 20% of the country’s GDP.
At the same time, geopolitical tensions intensified.
Hong Kong protests resumed in May after China approved a national security law that says it restricts the freedom of a Chinese city. Recent demonstrations took place after several months of protests last year that damaged the economy of the territory.
Singapore and Hong Kong have traditionally been competitors for their status as the main financial and wealth center in Asia.
Cash Flows To Singapore Jump
Last year, money increasingly came to the city-state.
According to the Central Bank of Singapore, in April a record amount of money went to the banks of the city-state.
Deposits from non-residents jumped 44% year on year to a record $ 62.14 billion Singapore dollars ($ 44.58 billion) in April – the fourth monthly growth and trend since 2019.
Markets in Singapore are also seeing an increase in inflows through passive funds that are growing year on year, according to Morgan Stanley. Passive investing is a strategy in which investors buy an index that broadly tracks the market, such as exchange-traded funds. It is becoming increasingly popular among investors, unlike individual stocks.
According to the investment bank, the real estate sector is a key factor in achieving these results. According to the investment bank, Singapore, the regional center for real estate investment, or REIT, was supported by a stable environment with low interest rates, which contributed to the pursuit of profitability.
CUIF These are companies that manage a portfolio of real estate, such as offices, shopping centers or hotels. The income received from these assets, after accounting for fees, is distributed as dividends among shareholders. Investors usually find REIT attractive for paying dividends.
“We believe that the growth of the Singapore REIT market, which led to an increase in representation in the benchmarks used to expand passive real estate and focused on ETFs, was and will be a significant factor stimulating the influx of passive capital,” the report said.
“Singapore’s perception of refuge as a backdrop of the current health crisis and geopolitical uncertainty may lead wealthier people (HNWIs) to distribute more of their wealth in the country.”
According to Morgan Stanley, the general increase in capital inflows “can flow” into local markets and further increase demand.
Morgan Stanley says Singapore stock prices have bottomed out, but said “there is a steady rebound.”
“High and sustainable dividends” are what distinguish Singapore stocks from other markets.
Here are five stocks that Morgan Stanley predicts will have sustainable dividends that fit the cyclical recovery theme:
- According to Morgan Stanley, United Overseas Bank, Singapore’s second largest lender, has the “most protective business structure” among all domestic banks.
- Development company City Developments has a leading share of private home sales in Singapore. Ng Morgan Stanley predicted a drop in home prices and sales this year would be milder than expected.
- Ascendas REIT is Singapore’s largest investment fund by market capitalization and has the largest share of business parks and industrial spaces in the city-state.
- The agribusiness of the Wilmar group, which received half of its revenue in 2019 from China.
- Netlink Trust, a provider of fiber optic residential infrastructure. The report said that fiber optic infrastructure will be critical for the deployment of smart cities.