SINGAPORE (Oct 28): The International Monetary Fund has slashed its 2019 growth prediction for Singapore to 0.5%, down from its July estimate of 2%. This is IMF’s second downward revision for the city state; in its World Economic Outlook report in April, it had forecast a growth of 2.3%.
The situation is not expected to get much better next year, either. “Growth is projected to remain subdued at 1% in 2020, given Singapore’s dependence on external trade,” Jonathan Ostry, Deputy Director of the IMF’s Asia and Pacific department says at a press conference on Oct 23.
The IMF has also lowered its projection for Asia’s growth to 5% for 2019 and 5.1% for 2020.
Amid an uncertain global economic outlook plagued by the downturn in electronics and exports, Singapore officials currently forecast a growth rate of between 0% and 1% this year.
However, on Oct 24, the Monetary Authority of Singapore (MAS) said it believes Singapore’s economy may be a few quarters away from a recovery, as the decline in trade and manufacturing this year has not really spread to other sectors.
The central bank’s chief, Ravi Menon, says “the current cycle should be bottoming out toward the end of the year and into next year”. This is based on the assumption that the slump will be largely contained in the trade and manufacturing industries. “It’s not going to be a robust recovery,” says Menon, who expects growth to come in around the midpoint of an official 0%-to- 1% forecast range this year, then “improve modestly” in 2020.
See also: Can SGX afford to wait up to a year for reforms?
Meanwhile in the UK, Brexit troubles are brewing once again as UK Prime Minister Boris Johnson is eyeing an election, after Parliament on Oct 23 blocked his plan to rush the Brexit deal into law, though the House did vote in favour of his Withdrawal Agreement.
The rejection timetable means that Brexit will not happen by Oct 31. And if the European Union agrees to the UK Parliament’s request that Brexit be delayed until Jan 31, then Johnson will call an election instead.
Esty Dwek, head of global market strategy, dynamic solutions, at Natixis Investment Managers, says, “In our view, the possible outcomes now are: Johnson’s deal gets approved (whether before or after Oct 31); Johnson’s deal gets approved, though with a second referendum attached; or MPs attach too many amendments and Johnson asks for early elections so that he can pass his version of the deal instead. Early elections are likely in the first two scenarios as well.”
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Stocks to watch
CapitaLand and City Developments (CDL) launched the preview of the highly anticipated Sengkang Grand Residences on Oct 25. Bookings for the integrated development, which sits on a 3.7ha site at Sengkang Central and will be connected to Buangkok MRT Station, will commence on Nov 2. Prices for the residential component, consisting of 680 units, start from $798,000 for a 474 sq ft one-bedroom-plus study unit. On the upper end, prices start at $2.1 million for a 1,324 sq ft for a four-bedroom- premium-plus-flexi unit. This translates into $1,586.10 to $1,683.54 psf. On Oct 24, shares in CapitaLand closed 0.55% higher at $3.63, while shares in CDL closed 0.94% higher at $10.73.
Coffee shop operator Kimly plans to acquire a portfolio of coffee shop leases and units, as well as industrial canteen units for a total consideration of $59 million. The group on Oct 22 said that its wholly-owned subsidiary, Jin Wei Food Holdings, has entered into a non-binding term sheet with a group of third-party vendors in connection with the proposed acquisition. The group will purchase four long-term leasehold coffee shops and three freehold industrial canteens, as well as three short-term coffee shop leases. Kimly’s shares closed 2.2% higher on Oct 24 at 23 cents.
Ascott Residence Trust (Ascott REIT) and Ascendas Hospitality Trust (A-HTrust) on Oct 21 held their respective extraordinary general meetings and scheme meetings for a proposed merger between the two trusts. The merger received strong approval of over 99% of the total number of unitholders’ votes. The combined entity, which will acquire the name Ascott Residence Trust, will have a quality portfolio of 88 properties across 39 cities in 15 countries. Units in both Ascott REIT and A-HTrust closed flat at $1.40 and $1.16, respectively, on Oct 24.
Shares in SembCorp Industries, Sembcorp Marine and Keppel Corp surged on Oct 21 on the back of an announcement earlier that same day by Temasek Holding that it intended to increase its stake in Keppel to 51% for a consideration of $4 billion, through its indirect wholly-owned subsidiary, Kyanite Investment Holdings. Temasek currently directly owns 20.45% of Keppel. The market is speculating that Temasek’s stake increase in Keppel is just the beginning of a potential merger between Keppel and another offshore and marine business. Sembcorp Marine had attempted a merger with Keppel in 2015. In the past five years, the two companies have been hit by a downturn in the O&M industry as oil prices plummeted.
On Oct 24, shares in SembCorp and SembMarine closed flat at $2.28 and $1.40 respectively. Shares in Keppel were 2.23% higher at $6.88.
