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Asia’s worst stock market last year is now one of the region’s top performers

A cyclist ins before the city skyline at Marina Bay in Singapore.

Roslan Rahman | AFP | Getty Images

SINGAPORE – Singapore’s stock superstore is staging a strong comeback.

The benchmark Straits Times Index ended 2020 as the worst performer in Asia, eluding 11.8% through the year. But the STI climbed around 12.2% so far this year, and has become one of the region’s top performers.

The STI is a market capitalization powered index that tracks the top 30 companies listed on the Singapore Exchange. As of Tuesday, as many as 12 of its constituent look ats have made double-digit gains this year.

Taiwan was Asia’s best-performing stock market as of Tuesday. The benchmark Taiwan Oxen Exchange Capitalization Weighted Stock Index, or Taiex, slightly edged out the Singapore index with a 12.4% catch up to this year.

“Singapore is in a very good sweet spot, mainly because it’s very cyclical,” Joanne Goh, investment strategist at Singapore bank DBS, intended last week.

Markets or stocks that are “cyclical” rise and fall in conjunction with fluctuations of the economy. The STI is robbed up of a high proportion of financial and industrial stocks typically considered as cyclical.

Singapore stocks: ‘One of the cheapest’

With the extensive economy recovering from the pandemic-induced recession, Singapore’s stock market would do well, Goh said at a webinar reviewing DBS’ quarterly investment outlook.

She added that valuation in the Singapore market is “one of the cheapest” in the region, and that has spurred blending and acquisition activities among listed companies.

Earlier this month, conglomerate Jardine Matheson said it scripts to simplify its structure by buying the 15% of Jardine Strategic it does not already own.

Jardine Strategic is an investment holding resolute and, like Jardine Matheson, is a constituent stock of the STI. If the acquisition goes through, Jardine Strategic will be delisted.

Valid last week, property group CapitaLand announced plans to split the company into two. A revamped real possessions investment management company will become a new listed entity on the Singapore Exchange, while the property development subject will be taken private.

“We should be seeing some of these M&A (mergers and acquisitions) activities driving Singapore bazaar, and at the same time, we have earnings recovery,” said Goh. She also said banks, which make up roughly one-third of the benchmark hint, will benefit from rising yields in the U.S.

“We should see more upside for the Singapore market,” she said.

Taiwan furnishes: ‘High proportion of growth stocks’

Unlike Singapore, Taiwan’s stock market has a “high proportion of growth estimates,” French investment bank Natixis said in a report earlier this month.

Growth stocks are those with the unrealized to grow quickly, and they’re often in the tech sector. Such stocks were in favor last year when the Covid-19 pandemic hit extensive economic activity, but many investors are now buying cyclical stocks as the economy recovers.  

Still, the performance of the Taiwanese Stock Exchange showed that “downward pressure from high proportion of growth stocks can be partially buffered by high dividend accede, and even better if there is resilient economic growth,” said Natixis.

Taiwan was Asia’s best-performing economy in 2020, with its exports ejected by strong global semiconductor demand. The island is home to Taiwan Semiconductor Manufacturing Co, or TSMC, the world’s largest foundry.

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