Singapore GE2020: Singapore stocks seen helped by election as diversity increases

The Singapore Exchange on June 3, 2020.
The Singapore Exchange on June 3, 2020.ST PHOTO: KELVIN CHNG

SINGAPORE (BLOOMBERG) - Another mandate for Singapore's ruling party - along with the opposition winning its most seats ever - will boost the city-state's equities, according to analysts.

Prime Minister Lee Hsien Loong’s People’s Action Party retained a firm grip on power but suffered its weakest performance in 55 years in office in an election on Friday (July 10) as the opposition Workers’ Party won a record 10 seats and secured two group constituencies. A more diverse parliament could lead to better policy reforms that will help the city-state’s companies, the commentators say.

“A diverse set of voices in the parliament mitigates any potential of group think,” said Justin Tang, head of Asian research at United First Partners. “Open and tough discussions will foster even better policies that will ultimately flow down to firms including government-linked companies.”

The Straits Times Index has already been rebounding, rising 19 per cent from a low in March as government stimulus and a reopening of the economy eased investors' concerns about the impact of the coronavirus on the economy. But even after its recovery, the benchmark stock gauge is still down 18 per cent this year.

The gauge rose as much as 0.7 per cent at Monday (July 13) open before turning negative to lose 0.4 per cent as of 9:27am local time.

Here are some comments from analysts on Singapore's election:


"Any dip in markets due to the lower vote share of the PAP should be bought into as Singaporeans have voted for continuity as well as positive change," said Tellimer head of consumer equity research Nirgunan Tiruchelvam.


"The market has already seen the worst due to Covid-19 and the US-China trade war."

"Singapore companies engaged in manufacturing will do better as the Government is likely to pursue more reforms" focusing on the sector, Mr Tiruchelvam said.


Watch government-linked companies such as Singapore Press Holdings, the Sembcorp group, Singapore Airlines group and SATS, said Mr Tang of UFP.

They are likely to become more nimble, and to adopt new solutions and new management styles as the diversity of voices in Parliament leads to change at the government-linked company level, he said.


“Upcoming policy changes would be keenly tracked, with changes to foreign workers policies amidst Covid-19 employment weakness as well as overall fiscal policy/tax code to help pay for continued Covid-19 support measures” being key, Citigroup’s analyst Patrick Yau wrote in a note on Sunday.

The STI registered 3-9 per cent declines in the one-month period after general elections in September 1988, August 1991 and May 2006 when incumbent’s share of votes declined, according to the note.


The policy ideas of Workers’ Party including linking central provident fund’s interest rate to 10-year returns generated by sovereign-wealth fund GIC, paid parental leave, a minimum wage for non-foreign workers will oblige the government to boost consumption and social investment, Prasenjit K. Basu, an economist and political strategist, wrote in a note published on Smartkarma on Sunday.

“Becoming more overtly democratic will also help Singapore compete more effectively with Tokyo, Taipei, Mumbai and Seoul for the mantle of Asia’s leading financial centre that Hong Kong is set to vacate,” according to Mr Basu’s note.