The crescendo of the conference season in Singapore, in the middle of the soldout Singapore Grand Prix with an attendance of 270,000, coincided with the US Federal Reserve Board delivering as promised the beginning of the downcycle of rates with a 50 basis points (bps) cut.
Deftly managed with good central bank-speak, it was heralded with all the right messages, including being ahead of the curve and a soft landing in the US economy.
This topic was extensively discussed at Wealth Management Institute’s Global Family Office Summit, Milken Institute’s Asia Summit and some of the bros at Token2049 all week.
The discussions will continue in other private equity conferences, including SuperReturn and Business China.
I am also not convinced that declaring Forest City in Johor, Malaysia, a family office tax-free zone will put a dent in this.
In the lead-up to the two-day Federal Open Market Committee (FOMC) over mid-autumn, there were talks of a cut of 75 bps, which then set the upper bar on what could look like a knee-jerk panic and lead to nervousness about the economy spoiling an equities party.
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A cut of 25 bps would be seen as too miserly, so the markets ho-hummed with the 50 bps midway cut.
The Bank of Japan duly followed on Sept 20 to not raise rates.
With the yen already strengthening against the US dollar, there was no need for further carry-trade hammering.
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I was asked why equity markets were mustered after the long hope for rate cuts.
Simply put, a “sell on news” was in order; after all, the Straits Times Index (STI) had even crossed 3,600 points (it closed 3,624 last week), and the REIT index had rallied almost 5%–7% in the week preceding with some REITs making double-digit percentage gains.
While volumes may have expanded on the way up, all technicals look suspiciously stretched with the short-term Relative Strength Index (RSI) above 80.
A 426-point pop from the 3,198 low of Aug 6 in the summer flash crash or a 13% gain for the famously boring STI was undoubtedly something to cheer about.
It even hit its November 2007 highs, the peak before the Global Financial Crisis.
The grid is being set
For the bulls, 3,800 is the technical target, and the all-time high of 3,870 seems within reach now.
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Those who attribute this to the work of the capital markets committee and hopes of a shot in the arm for market demand to accompany the recommendations are spot on.
There was a fireside chat with Lee Chuan Teck, executive chairman of Enterprise Singapore, who heads the development sub-committee of the capital markets project, and Hsieh Fu Hua, the former CEO of Singapore Exchange S68 (SGX) and the one who hired me, was illuminating at the pre-race Annual Summit of Insignia Ventures Partners, one of our most successful local venture capitalists, which has extended its impact from Southeast Asia to Asia and helped its companies achieve global success.
In response to questions by Insignia founder Tan Yinglan, Lee highlighted the wealth of sound, innovative companies nurtured by Singapore’s venture capital (VC) industry, some of which may be available for IPOs and exits.
Data presented showed 25,300 start-ups in Singapore with a 10% increase in companies incorporated in Acra year-to-date.
Bloomberg’s Global Startup Ecosystem ranking in 2024 puts Singapore at fifth globally with a value of US$144 billion ($186 billion) — ahead of the rest of Asean of Indonesia at No 36 with US$104 billion and the Philippines with US$6.4 billion.
Since 2019, regional companies with a Southeast Asian strategy have set up shop here and led the way.
However, they have been surpassed by Southeast Asia-headquartered companies going global since 2022.
These include North Asian companies such as ByteDance or Shein, which have characterised themselves as international Singapore companies.
It is rumoured that both are seeking a listing on the London Stock Exchange (LSE).
High-value job creation has perhaps a more visible and broader impact as it cuts across other industries and R&D.
This is complemented by the additional capital managed by 1,650 family offices established here, which was announced at the Wealth Management Institute’s global conference.
With the ingredients already in place, the argument goes, a concerted ecosystem effort should surely pay dividends for patient investors here, provided we are willing to take more risks investing in our own domestic markets.
Investors here cannot expect someone else (a regulator or politician) to look out for them when they invest in Singapore or should they lose money in the capital markets.
They need to do their homework and take it in their stride should business failures happen, just like when they catch the wrong end of the market when they invest overseas or speculate in ostrich farms or crypto altcoins.
Hsieh pointed out that the STI trades at 13 times P/E and is undervalued compared to the US markets at over 20 times P/E.
This value-against-growth comparison is not dissimilar to LSE versus many other markets.
For one, the two ecosystems are vastly different, a point this column has pointed out before.
Although our universities, with the support of multiple funds from the Research, Innovation and Enterprise Council (RIEC) under the National Research Foundation, have engendered innovative start-ups that have raised billions of dollars in private capital, our capital markets are not supported by public savings or private investments.
In other words, the supply of capital is there.
We just need to point some demand in the right direction sustainably.
This point, too, was raised in the statement by current SGX group chairman Koh Boon Hwee in its just published annual report.
A case of great minds thinking alike, or are we all the last fools?
The next lap
Last week, Chew On This reflected on a nostalgic evening at the 50th anniversary gala of the IBF Singapore (International Banking and Finance).
This week, I was chuffed to be invited by my old comrade in investor education, David Gerald, to the 25th anniversary celebrations of the Securities Investors Association Singapore (Sias).
This time, the capital market conversations took centre stage.
Some guests around the VIP tables in both events were the same people, except that there was a larger contingent from SGX.
I found it interesting that as the STI was on course towards making a 17-year high with significant stock market volumes over recent months, some in the broader community were still lamenting the rose-tinted days of the super bull markets of the 90s and the lead-up to 2007’s peak.
To be sure, Sias emerged from Gerald’s dedication in helping investors obtain some restitution from the Malaysians, who ended trading on the central limit order book (Clob) during the Asian Financial Crisis.
We have come a long way as a marketplace, with the constructive resolution of corporate matters in the boardroom and not the courtroom, resulting in higher privatisation offers for shareholders in some cases, and more transparency and investor relations efforts by large listed companies like Singapore Telecommunications Z74 (Singtel), Keppel Corp and DBS Group Holdings.
However, in some ways, we have not come far enough.
“Smart investors always succeed” was another acronym for Sias, which Gerald had coined to bring home some truths.
Inevitably, those who make uninformed speculative punts still get hurt.
That is inevitable in any capital market.
But we need to grow up and take ownership and personal responsibility for our choices, good or bad.
I was glad to see participants of the Sias youth chapter at the event.
It gives me hope that more Singapore youth can start investing early and reap long-term rewards, provided we have the regulatory and infrastructure framework for unit shares and fractional investing, which is the convention in many markets, including the US.
Attractive features include local brokers willing to waive minimum commissions for small trades.
Their online-only competitors and other fintech plat- forms already offer that.
Party continues, but where? So, will our local market have legs to run further? The answer is yes.
Will it happen in a straight line?
Chew On This is less confident about the near term.
With the STI having a good run up across 3,600 points, I have taken profits on my Nikko STI ETF holdings in my Supplementary Retirement Scheme (SRS) account by selling the ETF on the way up through the Mid-Autumn Fed party.
As indicated in last week’s Chew On This on the sprouting of the REIT green shoots with volume and price expansion, I had taken some liberties to rotate and switch.
The switch involves the sale of beta stocks and buying downside protection in REITs that lagged the rally or just parking in safe-as-it-goes local business trusts like NetLink Trust, yielding over 5%.
Suppose the STI consolidates back to the breakout points around 3,500 for the rest of September, or markets get queasy in October.
In that case, I hope to return to select blue chip stocks or the ETF with the secular tailwind of forward rates easing and keeping the market for REITs and high-dividend-yield stocks well supported in the treacherous months ahead, which include an uncertain US election.
In this process, I have also switched to the weakest link for the last couple of years, dipping into some higher beta stocks for the Lion-OCBC Securities Hang Seng Tech ETF and Lion-OCBC Securities China Leaders ETF, which were close to multi-year lows.
Technically speaking, taking a small bet earlier may already have some short-term payoff as both indices appear to have broken out of a peri- od of consolidation.
It was not the mid-autumn that was the draw, but the anticipation of October being wobbly for global markets and as China goes into the Golden Week break in October.
It has also been countercyclical to international markets of late and seems ripe for a relative value trade.
With this market posture, which also includes adding to the Lion-Nomura Japan ETF after the recent correction as the yen strengthened, I leave the markets for a week, taking the Community Chest Sharity Elephant Mascot up to Mount Fuji and Mount Akadake as a fundraiser for the less privileged among us.
Before my departure, I was heartened by the support for the online campaign on giving.sg, which has raised over $100,000 for low-income families and children with special needs.
I hope to return renewed and refreshed as we embark on the tricky last quarter of 2024. Ganbatte!
Chew Sutat retired from Singapore Exchange after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange and he was awarded FOW’s Lifetime Achievement Award. He serves as chairman of the Community Chest Singapore
