"On a glory night
Where the children of tomorrow dream away
In the wind of change”
This 1990 song by veteran rockers The Scorpions is one to remember for events the world will not forget. On June 4, 1989, tanks rolled into Tiananmen Square, followed just months later by the fall of the Berlin Wall.
Yet, a new dawn with the lifting of the Iron Curtain never materialised. The oligarchs of the newly-formed Commonwealth of Independent States bought up key industries for a song. As they sailed their super yachts to sunny Monaco dreams of a Russian Revival turned to nightmares from Chechnya, Georgia and Moldova. With the invasion of Ukraine, the mother of all sanctions was unleashed on Russia by the West.
June 4 remains a touchy topic. However, economic and market reforms since then, China has generated an unprecedented boom to overtake Japan as the world’s second largest GDP in 2010. As China continues to grow at a faster pace than the US, fights have broken out across multi fronts: Huawei, technology IP and restricted capital market access. Given how symbiotically linked by trade and business to the rest of the world, the Middle Kingdom awkwardly wriggles neutrality in the European fight.
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The military industrial complex of Uncle Sam has no such qualms. US defence stocks have surged, now that the Europeans have become motivated customers — who will now have to borrow and spend to pay for refugees on top of keeping Russians out.
Meanwhile, consumers across the world found that pumping petrol and eating have become more expensive than just months ago. What a joy it must have been for many Singaporeans, as they rushed over the Causeway on April Fool’s Day to top up RON97 (or subsidised RON95) in Malaysian ringgit.
We’ve just hit the first quarter mark of 2022. Yet, there’s already enough volatility in the markets in the form of crashing roubles, crypto and China tech. Alongside, precious metals and oil gyrated like John Travolta in Saturday Night Fever.
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For nimble traders, it was an opportunity to make small fortunes, For the brave, blocks of Russian commodity stocks are available at fire sale prices — if you can stomach the provenance. For others who can’t take the heat, it was probably better to get out of the fire. Even for the passive global portfolios, many would have been marked down 5%–10% in 1Q.
For those concentrated in a few risky trades or have fled in panic, they have fared worse. To be fair, global equity markets were overdue for a reckoning — especially those that rose in fashion through the pandemic, with fear of missing out or FOMO-fuelled investors unable to course correct. US special purpose acquisition companies (spacs), meme stocks, loss-making tech stocks either ran aground or sunk to uncharted depths. Yet, back home, sunny Singapore’s Straits Times Index (STI) finished the quarter up around 10%.
Parallel universe
In 1Q, global IPO market volume was down 37% y-o-y and proceeds raised plunged by a more dismal 51%. Just barely a few of quarters preceding, investment bankers were effortlessly placing clients’ shares at top of the cycle, or, in the case of Grab Holdings, shepherding the world’s largest spac combination deal.
One honest investment banker I met on April 1 said wryly that both bankers and investors were responsible for chasing the top, much like the dotcom bubble in the couple of years leading to April 2000, and that they were all partly responsible for the hubris that follows.
Reality has now taken precedence over hype and hope. Investors demand more of new IPO aspirants and their founders, especially for those still hawking at peak valuations. Inevitably, in the lofty markets of US and North Asia, balloons are bursting rather than champagne bubbling over.
Of note is the US Securities and Exchange Commission (SEC): Since the pause last year in March, it has adopted more stringent rules around spac combinations and professional liabilities — much like the more balanced Singapore regime. This is likely to lead to a number of US spacs running out of time and returning cash.
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The conversation has also shifted to Singapore’s re-opening. Expatriates relocating from Hong Kong (temporarily, it is claimed), has led to the apparent shortfall of four-bedroom apartments and houses. In any case, F&B owners and construction towkays are smiling more broadly as they fuss over these new clients other than the crypto barons and the global rich who have made Singapore their home through the pandemic.
As local businesses and ordinary Singaporeans alike celebrate the resumption of public housing and infrastructure projects as well as maskless freedoms, a common theme has become more apparent.
Far from the European theatre of war, amid the politics of the Great Powers, Singapore is weathering the Covid-19 crisis better than most, thanks to the massive government support that prevented a deeper fall back in 2020 and 2021. As bankers are intimately aware, wealth continues to redomicile in Singapore — even from formerly neutral Switzerland. Singapore is clearly on the ascent.
As this column has argued since it began last September, Corporate Singapore has through the pandemic reinvented itself and is reinvigorated towards an ESG (environmental, social and governance) future, value is being discovered and realised. As the same banker quipped, the STI is the best performing market in the world!
Second best performing
Alas, he was almost right. STI, with its 10% gain, was actually the second-best performing bourse in the world. Saudi Arabia’s Tadawul, led by Aramco single-handedly, is up 15% as energy heats up. Jakarta, which just cleared the GoTo IPO fund raise of US$1.5 billion ($2 billion), is just behind us, although closer to 5% in US dollar terms.
A smattering of boring equity indices managed to hold their noses just above, including the FTSE 100 (where Deliveroo’s IPO flopped in 2021), SET and Bursa Malaysia in Asean and TMX, underpinned by Canada’s commodity sector.
On the other hand, the Hang Seng Tech Index is down 20% year to date, Shanghai is down 10% and the Hang Seng Index is down 6%, as they continue their multi-year correction.
In the West, Nasdaq is down 10% and the S&P has lost 5%, with the tech-focused barometers dropping far deeper to digest the excesses from 2021. Technical chart indicators remain strong for Singapore going into 2Q, whilst most other indices remain trapped in bear market conditions.
There is broad support reflected across STI constituents. The banks, especially United Overseas Bank, have made handsome gains. Yet, as this column has flagged on Jan 21, the likes of Sembcorp Industries, Keppel Corp, CapitaLand Investment, City Developments, Singapore Telecommunications, Wilmar International and ST Engineering were all alternative ways to ride up with the STI.
With Singapore Airlines and SATS almost in-line with the STI, is 2Q the time to look at other counters including consumer laggards to ride on the post-Covid-19 theme? They include Thai Beverage, Singapore Exchange, Genting Singapore, the Jardine stable including Jardine Matheson Holdings, Dairy Farm International and Hongkong Land, which were roughly flat, or Venture Corp, which has bucked the trend with its 4% drop ytd.
Just before the Covid-19 outbreak in January 2020, the STI has gained from 3,153 points to 3,419 points as of April 2. In contrast, the Hang Seng Index dropped to 22,039 points from 28,400 points in the same period. If the “rotation to reality” continues with investors demanding real profits and paths to profitability, this barely noticed “wind of change” in favour of the STI may have much more legs to run — just like the dash across the Causeway when the land border reopened.
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.
