Singapore stocks still a bright spot globally: Investors

The Straits Times Index has fallen almost 8 per cent from a recent high on July 25 - about twice as much as an index of global shares. But the estimated 12-month forward dividend yield is among the highest in Asia, according to data compiled by Bloom
The Straits Times Index has fallen almost 8 per cent from a recent high on July 25 - about twice as much as an index of global shares. But the estimated 12-month forward dividend yield is among the highest in Asia, according to data compiled by Bloomberg.ST PHOTO: DESMOND WEE

Steady dividends cited as reason even as benchmark STI slides amid trade tensions and slowing economic growth

Singapore's stocks may be falling, but some investors say they are still a bright spot in a global equity market marred by trade tensions and slowing economic growth.

The reason, they say, is the steady dividends paid out by much of the country's benchmark gauge, which is filled with banks, telecommunication companies and real estate investment trusts (Reits).

The Straits Times Index (STI) has fallen almost 8 per cent from a recent high on July 25 - about twice as much as an index of global shares - as the economy and company profits feel the impact of tensions between Singapore's two biggest trading partners, the US and China.

But the estimated 12-month forward dividend yield is among the highest in Asia, according to data compiled by Bloomberg.

"Banks, Reits and telcos have a big weight in Singapore's index, so the overall market should be fine," said Mr Sat Duhra, who co-manages Asian dividend income strategy at Janus Henderson Investors.

He added that Singapore should remain among the highest-yielding markets in Asia.

The STI boasts an estimated 12-month forward dividend yield of 4.3 per cent, the second-highest among major Asian equity markets after Australia, according to data compiled by Bloomberg.

DBS Group Holdings chief investment officer Hou Wey Fook recommended an overweight on Singapore stocks, especially Reits in the retail and industrial sector.

HEAVYWEIGHTS

Banks, Reits and telcos have a big weight in Singapore's index, so the overall market should be fine.

MR SAT DUHRA, who co-manages Asian dividend income strategy at Janus Henderson Investors.

He cited positive rental revision rates and growth in their distributions per unit, and noted that companies with a fixed dividend policy should offer investors more solace.

Reits, which dole out much of their profit in dividends, have been a darling of investors. An index of Singapore-listed Reits surged 17 per cent this year and has an estimated 12-month forward dividend yield of 5.3 per cent, data compiled by Bloomberg shows.

Some analysts are worried that Singapore's slowing economy could hurt earnings, and hence the dividend prospects of some companies.

Falling profits will probably decrease dividends, said Mr Jarick Seet, head of Singapore small and mid-cap research at RHB Securities.

Mr Daryl Liew, head of portfolio management at Reyl & Cie in Singapore, said he expects downward pressures on dividends to persist until "macro concerns get resolved".

But against a backdrop of lower interest rates globally, any weakness in the Reit sector should be seen as a buying opportunity, especially for industrial Reits, said Mr Kieran Calder, head of Asia equity research at Union Bancaire Privee.

Industrial Reits have the "best combination of size, yield and underlying earnings growth", which can support an increase in distributions per unit, he said.

"Global monetary easing is back, so if the search for yield continues, then Singapore's Reits and the STI should continue to find a bid," he added.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on August 24, 2019, with the headline 'Singapore stocks still a bright spot globally: Investors'. Print Edition | Subscribe