In the last two weeks, my Facebook feed was filled with pictures of friends taking advantage of the all-time-high strength of the Singapore dollar (SGD) versus the Japanese yen to shop in Ginza, indulging in kaiseki (multi-course) dinners, or join the long queues on the slopes of Niseko and Tokyo Disneyland.
As for myself, friends who have been following this column have speculated which Asean capital I might end up in next, after trips to Jakarta and then Bangkok. The good news for me, personally, is that work-related travel has wound down for the year, together with lower market trading volumes.
Later this month, I will be transiting to Uzbekistan via Kuala Lumpur, but will not have the chance to fill up the new Malaysia Digital Arrival Card. From my observations from afar, and from my two trips this year, my view of Malaysia as an investment destination has not changed.
Neither am I tempted to wander into Manila. The Philippines is a very large country full of promise, but somehow, I am happier to stick to the consumer businesses like Del Monte or Emperador that are already listed on offshore markets like the Singapore Exchange S68 . At least it is still investable from afar, unlike Myanmar which is in the throes of an unfortunate military step back to the past.
Meanwhile, there is seemingly nothing going on in sleepy Brunei, although its sovereign Sultan Hassanal Bolkiah has money to invest and spend (I hope in Singapore). Laos and Cambodia are destinations on my holiday list with Luang Prabang and Angkor Wat, and perhaps Papua New Guinea is a conservation destination to see the Birds of Paradise it is famous for.
But if I get the chance, Vietnam is on the radar next year. It may be third time lucky, if inflation and corruption can be overcome. I remember when structured access investment products were the rage in the mid-2000s among the private banks, when the handful of blue chips soared to the stratosphere where banks traded up to 10 times book value as foreign capital piled into a narrow market. Then the dong devalued. For a season, rentals of scarce, good-quality apartments for expats in Hanoi and Ho Chi Minh City were priced at Orchard Road levels. Then new supply came on board and it “normalised”.
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These last couple of years, it has been a private equity haven, as investors from corporates like Raffles Medical to funds like Heliconia flood into sectors like healthcare and education. As more manufacturing operations relocate to Vietnam from China because of “friendshoring” trends, employment has become more gainful and wealth is growing. This frontier market may become more accessible over time as the currency and stock markets become more open, but not yet. In the meantime, one cannot help but notice that there are more wealthy Vietnamese tourists in Japan and Singapore. Back in November 2020, Viva Land, which is linked to billionaire Truong My Lan, made news for setting Singapore CBD office benchmark prices when it paid $500 million to Tuan Sing Holdings T24 5IC for 39 Robinson Road. Just over two years later, Yangzijiang Shipbuilding paid just $390 million for the same property following news of Truong’s arrest in Vietnam which triggered a “fire sale”. The Telegraph Hotel next door, which Viva Land bought around the same time, was rumoured to be snapped up by Sunway following a 30% haircut.
Not all quiet on the waterfront
For those of us in Singapore, it has been quiet on the streets from late November to early December. A good friend posted a “perfect recommendation” for a “last-minute vacation destination” — “Please come to Singapore. The streets are quiet. Traffic is light. The malls are not crowded. Hawker centres are at 80% capacity… [and] the best part is… the temperature has dropped to 25 degrees...”
This has been noticeable, as the rush of corporate events, offsites, gala dinners and school exams wrapped up and Singaporeans decamped to Malaysia and Japan. The September F1 and conferences boom for hospitality and F&B dropped off into October, and some blamed the PSLE exams for a slowdown in local consumption activity later that month. Others apportion some blame on the crackdown on the Fujian Gang.
To be sure, the strong SGD does make it attractive to shop overseas, and where one-star Michelin restaurants in Japan cost less than $100 per person. At least at the “Ya Kun” end of consumption, the tour buses with Chinese and Vietnamese are back, even if at LVMH and Cartier boutiques in Ngee Ann City, salespeople are still waiting for Singaporeans to return from holidays for last-minute Christmas gifts.
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This is indeed a global phenomenon as we have seen in the results and stock prices of luxury stocks in 2H2023. Inflation may have started to bite, but US inventory destocking has perhaps run its course and I am now a bit more optimistic about 2024. Korean semiconductor companies have raised their guidance after bottoming out in 3Q. Singapore’s own Purchasing Managers’ Index has expanded for the third straight month to November with electronics breaking a 15-month losing streak. New orders and input purchases both entered expansion territory for the first time since August 2022 and July 2022, respectively.
The post-pandemic initial growth in consumer expenditure in services including hospitality and travel may be plateauing, and profits will be affected by stiffer competition. But what appears to be working through the economy is a potential stealthy upswing in the global semiconductor market as anticipated by the World Semiconductor Trade Statistics. US subsidies on semiconductors and electric vehicles are giving some tailwinds. If, and that is a big if, the Chinese government’s much-anticipated property market stabilisation measures do kick in — including a rumoured backstop of beleaguered Evergrande by Ping An nudged into playing this role — and confidence is gradually restored, stabilising employment in China after a year in the economic wilderness, we might be in for some positive surprises in the manufacturing and industrial sectors.
In this regard, now that the downgrades seem to be all out there by the analysts, it could be time to look to Venture Corp, AEM Holdings AWX , and even perhaps Nanofilm Technologies International MZH , as the cycle looks set to turn. Early indications in December are that this has not gone unnoticed. The streets may be light with school holidays and Orchard Road has got its annual Season of Giving lights out to encourage Christmas shopping, but in the factories, ports and logistics sectors, green shoots are sprouting.
Recharged and re-energised
Last week, the Global COP28 jamboree made its way to Dubai, which, in my humble opinion, is ironically so, given this emirate’s infamy for energy excesses. More than 70,000 delegates descended on the city with the air-conditioned beach (you get a tan feeling cool from beneath), and a ski slope in the Mall of the Emirates, including hundreds who travelled by private jet. In the name of business continuity planning, the UK Prime Minister, Foreign Secretary and King Charles III flew three separate planes.
Of course, it can be credibly argued that the amount of carbon dioxide generated is dwarfed by the amount of commitments and deals announced — provided that they actually get executed and materialise, and the announcements are not merely greenwashing ones. It does take face to face to negotiate, and a handshake always beats a Zoom meeting where one does not know who else is listening in the room and hence may not speak completely freely. But some delegations do probably need to take a harder look at their numbers.
Singapore may be initially late to the climate party, but it is good to know that we are now making great strides to lead not just conversations and are taking action. Indeed, even the Orchard Road lights are repurposed LED ones with fixtures reused from past years. Solar energy powers the set pieces in front of Mandarin Gallery and Plaza Singapore, and renewable energy credits were purchased from SP Group. Estimates suggest that 4,000 trees will be saved!
It is heartening to note that as a global financial hub, we are now playing a significant role in transition finance. The Singapore-Asia Taxonomy launched by the MAS over the weekend will help industry deliberately take the tough decisions to accelerate the party to net-zero emissions, not through just cutting off coal per se that impacts communities that depend on it for livelihoods. This by ensuring that they do it within the fixed criteria set, and thus will not run the risk of green or transition washing accusations. The trade-offs in Asia between net-zero, economic development, population growth and rising energy demands are not trivial, and just taking a values approach to “Just Transition” presents a conundrum of whose justice sets the standard.
The Singapore Government will also be prepared to provide catalytic capital of US$5 billion ($6.7 billion) in the form of grants or loans at lower interest rates, “blended” finance to attract commercial capital. This presents practical investment opportunities for our listed companies, beyond just the banking sector. By de-carbonising quicker such as Singapore Airlines C6L ’ blended sustainable aviation fuel pilot initiatives, Sembcorp Industries U96 ’ execution of its brown to green strategy, including its recent $200 million wind asset purchases in China and India, or Keppel Corp’s divestment of its offshore and marine unit to form Seatrium, and accelerated shift into fund management with its initial $517 million purchase of Aermont Capital, these companies can continue to retain capital (asset owners who are signatories to Principles for Responsible Investment or have net-zero commitments do not have to sell), attract new investors and see continued sustainable growth in their business and stock price.
These post-Covid, 2023 winners may continue their run in 2024, as banks take a back seat with a more moderate interest rate environment while they benefit from lower financing costs. A more than 10 % recovery from last month’s pullback still sees them trading below 2023 highs. There could be green gifts to unwrap in the new year ahead.
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
