SINGAPORE - Investors betting on Singapore’s two largest Internet companies are staring down hefty losses as rising interest rates and recession risks extended a tech rout that wiped out US$110 billion (S$148 billion) from their market capitalisation.
E-commerce platform operator Sea has plunged 78 per cent in 2022, while ride-hailing firm Grab Holdings has more than halved. The two companies, both listed in New York, are the largest tech firms in Singapore by market value.
They were added to the MSCI Singapore Index with much fanfare in the past two years when there was still appetite for tech stocks in the region. But higher interest rates and a slowing economy could spell another challenging year ahead as investors question their ability to turn a profit.
The MSCI Singapore gauge has lagged the Straits Times Index – which does not count Grab and Sea as its members – by about 20 percentage points in 2022. The underperformance was largely due to Sea’s slide and the stock could continue to be a major driver of the dispersion between the indexes in 2023, according to Mr Brian Freitas, an analyst who publishes on research website Smartkarma.
The MSCI Singapore Index is down 14 per cent in 2022, with Sea holding the fourth-largest weighting at 8.4 per cent and Grab at about 2 per cent. In contrast, the Straits Times Index – dominated by old-economy sectors such as banks and property – is up about 5 per cent.
The outlook for the Singapore-based tech firms remains dim as worries about a recession have triggered layoffs, closures of business units and other measures to rein in expenses across the tech industry. Still, the “recent cost-cutting measures should help both companies weather any storms better,” Mr Freitas said.
Last week, Sea founder Forrest Li announced in an internal memo that the company is freezing salaries for most of its staff and is paying out lower bonuses in 2022, bracing itself for a worsening global economic environment in 2023.
Grab will also implement measures that include hiring and salary freeze, Reuters reported in December, citing a staff memo.
Investors have also punished other money-losing tech stocks in the region with Indonesia’s GoTo Group hitting record lows over the past month. Meanwhile, start-ups in India have slumped amid valuation concerns. BLOOMBERG
