Interestingly, whenever Sea - listed on Nasdaq and included in MSCI Singapore - falls, the Straits Times Index firms up. To recap, Sea’s inclusion into the MSCI Singapore was to take place in four steps, 5% in March 2021, 25% in Aug, 50% in Nov, and 100% in Feb 2022. Initially, investors were concerned because Sea’s market cap was once higher than that of the three local banks put together. No more. As at Dec 16, Sea’s market cap was US$118 billion. The three local banks together have a market cap of US$132 billion. Of this, DBS is the largest with a market cap of S$83.9 billion.
The US Federal Reserve has indicated that it is likely to have three rate hikes in 2022. Sea remains in the red, and to continue as a going concern, it may need to raise equity or debt or hybrid securities, especially if it plans to launch a digital-full bank in Singapore in 2022. At one point, Sea was up more than 80%. As at Dec 16, Sea was up just 9.4%. In contrast, DBS is up 28% year-to-date, UOB is up 18.8% and OCBC is up 12.6%. So long as Sea trends lower, the STI is likely to move in the opposite direction.
The Hang Seng Index ended the week of Dec 13-17 at 23,192, the year’s low, and a one year low. In a strategy report, OCBC Investment Research pointed out that the MSCI World Index gained 18.5% this year, after a 14.1% gain in 2020. However, China and Hong Kong stocks were badly hurt by domestic factors including heightened regulatory policies, concerns of more measures ahead, and the troubled Chinese developers. Year-to-date, the MSCI China Index shed 19.5% after a 26.7% gain in 2020. The Hang Seng Index fell about 11.9%.
To boost activity, the Hong Kong Exchange announced on Dec 17, that it has a ready regulatory framework for blank cheque companies, or Special Purpose Acquisition Companies (SPAC). Bloomberg reports that Hong Kong has taken a careful approach to allowing SPAC listings after being hit by scandals surrounding shell companies in the past. SPACs were very popular in the US earlier this year. Hong Kong family offices have played a “major role” in US SPACs, the Family Office Association Hong Kong said in November, according to Bloomberg. Listing via a SPAC could boost listings in Hong Kong which has experienced a slowdown this year because of market turmoil in China.
