A random monitor lizard, strolling nonchalantly across the Formula One (F1) racetrack, helped remind eyes on this global spectacle that the city-state is not merely an LED-lit concrete jungle but one which commingles with wildlife. After Red Bull’s Max Verstappen called out the sighting, a race engineer quipped: “Maybe Godzilla had a kid.”
It wasn’t clear if the lizard threw him off but in a surprising turn of events, both Verstappen and his teammate Sergio Perez did not make it through to the next round after dominating the first 14 races of the season. At least they survived unscathed, unlike Lance Stroll, who crashed his Aston Martin spectacularly in the qualifying rounds. Teammate Fernando Alonso also had a race to forget after running over another lizard attempting the same stunt.
Despite what was expected to be a more muted Singapore Grand Prix this year, 260,000 tickets were sold. As usual, the Paddock Club was chock-full of well-heeled corporate types networking in the suites while sampling fare dished out by Michelin three-starred restaurants helmed by celebrity chefs. Given recent news, one can assume everyone invited into each of the hospitality suites has made it a point to declare or tick all the relevant compliance boxes. Meanwhile, Ong Beng Seng, managing director of Hotel Properties, was spotted smiling for the cameras and making small talk all around as he walked the playground he was instrumental in bringing in.
For the Singapore Tourism Board and proud Singaporeans, there must have been relief that we were not blanketed by transboundary haze and the world was able to see our annual iconic night race in all its splendour, which also inspired the racers to overtake one another more frequently than is customary in this circuit.
Nonetheless, this being in safe Singapore, the safety car made its appearance as Stroll’s Aston Martin crashed early on, although it was Mercedes which saw drama when George Russell, fighting for second place, hit the wall with half a lap to go to the finish.
(Red) Bull on the run
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The F1 night races, having become a fixture on Singapore’s calendar this time of the year, attracted a slew of other international conferences here in the few weeks before and after. These included the 21st Forbes Global CEO Conference, Milken Institute’s 10th Asia Summit 2023, Global-Asia Family Office Summit 2023 and Philanthropy Asia Summit 2023. There was even the private equity-focused SuperReturn Asia 2023, which was long hosted by Hong Kong but is held here for the second year running after Singapore opened up for international business earlier from the pandemic last year.
Those not yet nursing a hangover at Amber Lounge were entertained by the galaxy of global business and investment stars. Perhaps, the local spirits were rejuvenated too by thousands of venture capitalists and crypto bros at Token 2049 and their fully booked cocktails and parties.
Even though Ray Dalio declared at the Milken conference that he prefers cash to debt and bonds, the crypto brigade — who came all over from New York, San Francisco and Eastern Europe to the self-exiles from Dubai — was full of optimism. After last year’s implosion and prolonged crypto winter, there was a lot of talk of investment capital for new ideas, technology, games and even altcoins. Family offices, a key source of capital, appear more emboldened by institutional venture money taking small bites at the more trusted end of the Web3 technology.
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In the bubble of the conferences held at Shangri-La’s and Four Seasons or the private function rooms where the men in suits entertained and networked, one could feel the disconnect between the reality of higher interest rates weighing down 2021 vintage public and private market investments as well as specific sectors such as US commercial REITs.
Yet as Chew On This in issue 1102 postulated, ARM’s IPO did get off the ground successfully with a 15% post-IPO pop. Meanwhile, investment bankers are certainly popping the champagne as they wonder how else to spend the remaining US$80 million ($109 million) or so in fees earned handling this listing.
And when the deal-making window opens, I expect to see more headlines gradually turning positive in belated support of the markets that have already turned. We could even see the return of decently-sized IPOs on the Singapore Exchange.
One such listing might be that of medical device maker Advanced Medtech, under the leadership of chairman Philip Yeo and CEO Abel Ang, two EDB stalwarts. The company probably finds the Singapore market, where its global headquarters is located, more hospitable, given the appreciation for steady and sustainable growth for companies in healthcare services and devices. Compare this to the US where investors are more interested in speculative highgrowth types such as early-stage pharma plays that can win big but lose bigger.
A case in point is Singapore’s proptech company Simpple’s Nasdaq listing earlier this month. Raising US$8.4 million from the ocean of capital in the US may be critical for growth at this stage. However, even larger companies like PropertyGuru have struggled from the first day of listing. Likewise, Ryde filed for a U$17 million fundraise on the New York Stock Exchange after it was rumoured to be seeking a Catalist listing. For such small caps, the ride could be a bumpy one far from their home market, given how even the mega IPO of Grab’s US$40 billion de-spac has floundered.
The local market rallied despite itself. This column took a leap of faith to call for a rebound of the Straits Times Index (Chew On This issues 1103 and 1104) even though technical indicators weighed heavily on the market. As the banks led the first wave back up towards 3,220 points, the laggards which were a drag in the first half of September led the next charge towards 3,300. These included oversold CapitaLand Investments, Keppel Corp, Singtel, Singapore Airlines, Sats and Sembcorp Industries. And when the F1 kicked off, the STI rallied through its 50-, 100- and 200-day moving averages in one go.
Even Venture Corp found a bit of footing after very rare share buybacks at $12.50, prompting analysts to reassess their calls. The US Fed may or may not stay its hand from here but for the time being even strong employment and payroll numbers in the US are interpreted with silver linings. Short of a macro or geopolitical crisis in a risky Black October, this might just be a clear positive run till year-end as investors regain their risk appetite and stocks find the energy to accrete up. Singapore may have been surprised by being the only F1 race this year where Red Bull did not win but the stock is now riding on the global upswing.
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Chinese Riddles
Wobbles in the Chinese market in August appeared to have stabilised somewhat. This column suggested that like last October, maximum pessimism in investor and news flow often suggests a temporarily tradable bottom, if not more. Persistent Western political commentary of the Chinese government mismanaging its economy and conveniently omitting its youth unemployment statistics, and fears about a real estate implosion (again) weighed heavily all around. Buying companies with exposure to China on dips, as this column suggested last month, seems to be paying off as we head towards its market break during the country’s Golden Week in October.
Miraculously, Country Garden did not default on its overseas debt as it made its interest payment right on the wire of its one-month extension in September. Apparently, the latest property market measures by the Chinese government started getting some traction when short-sellers ran out of bullets as markets stabilised. The slow-moving train wreck of Zhongzhi’s inability to pay out on its wealth management trust products linked ostensibly to real estate investments appears to have received some positive attention from the authorities too.
Talk of an official backstop to stem the liquidity crunch from becoming a solvency crisis has led Western critics to bemoan state intervention in China once again. Perhaps, they have forgotten how heavy-handed Henry Paulson was in dealing with the Global Financial Crisis in 2008 or how Ben Bernanke became known as Helicopter Ben for printing and throwing money at the public to keep the party going.
In any case, talk of an economic Armageddon in China has subsided and North Asian markets have started to stabilise. Investors have also started noticing Chinese stocks listed in Singapore too — especially those in the real estate sector. Capitaland China Trust rebounded from 93.5 cents to $1.27 in the recovery bounce from last October to February. It then slid back to 89 cents as hopes of a recovery in China were dashed. At close to 8% yield and 65% of book value, the stock is difficult to ignore.
In a similar vein, Yanlord Land Group rebounded from its then-low of 84 cents last October to as high as $1.13 in February. However, after it suspended dividends for FY2022 ended December 2022 despite making a profit of RMB1.1 billion ($206 million), it dropped as low as 63 cents in late August. This puts the share price at less than 20% of its June NAV of RMB18.66 or $3.49 per share and just below six times earnings. Yanlord’s non-China assets, including the likes of UE BizHub City Singapore, Rochester Mall and Park Avenue Rochester, are presumably free even if one were to discount onshore assets altogether. Yanlord has since staged a slight recovery to close at 70 cents on Sept 19.
There are other forgotten S-chips and local companies with Chinese exposure too. With the onshore tourism boom, Straco Corporation, which already delivered a decent profit reversal for its 1HFY2023 ended June, could grow even more this quarter and a half. Followers of this column will know that I generally like stocks with discounts to NAV. When no one is interested, the value trap stock can stay quiet and underperforming for a while. On a lucky day, one might hit the jackpot of privatisation.
As we trawl the market, there are many real estate companies with large Chinese exposure. These included Hongkong Land Holdings or REITs such as Mapletree PanAsia Commercial Trust. Or relatively well-managed pure Chinese trust — Sasseur REIT. Or other companies trading at significant discounts to NTA of between half or less. If I am lucky enough to lock in some blue-chip gains as the STI continues to rise, I will be looking to recycle some into Singapore-listed Chinese high-yielders with such deep NTA discounts. Given where they are priced, the risk-reward assessment looks promising and I hope to be in for more positive surprises, like this year’s Singapore Grand Prix.
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
