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PR Newswire
25-05-2020, 12:07 PM
There has been much complaint about how the STI Index and the SGX public listed members in general, reflect so little about the economy of Singapore, and is insufficiently diversified. And now, we have a COVID crisis, a crisis that some say may permanently change some things about our economy (the more prominent being to travel and to working from home).
To that I counter that there is a macro picture we may not be considering : the Singapore govt.
It is a truism in value investing that we are interested in all the future cash flows of a investment. Therefore, when a market or stock goes down, we need to consider if there is “permanent” damage or “temporary” damage to earnings potential. With the forward looking actions of the Singapore govt to try to preserve or even enhance Singapore’s reputation for forward looking, efficiency and stability, and the firepower to back it up (our probable 0.5 to 0.75 trillion dollars in reserves), I think it is fair to say that this downturn in earnings is temporary. Even if there is a permanent shift in work, play, and industry, we have sufficient power to make the transition nicely.
To that end, despite the STI being very poorly diversified, the STI index may represent a decent way to participate in this macro conclusion, without a lot of hand wringing about what to invest in next. It is top heavy in the 3 local banks. But the 3 local banks are a proxy to Singapore’s economy. When Singapore does well, they do well (up to a point).
Any comments?
To that I counter that there is a macro picture we may not be considering : the Singapore govt.
It is a truism in value investing that we are interested in all the future cash flows of a investment. Therefore, when a market or stock goes down, we need to consider if there is “permanent” damage or “temporary” damage to earnings potential. With the forward looking actions of the Singapore govt to try to preserve or even enhance Singapore’s reputation for forward looking, efficiency and stability, and the firepower to back it up (our probable 0.5 to 0.75 trillion dollars in reserves), I think it is fair to say that this downturn in earnings is temporary. Even if there is a permanent shift in work, play, and industry, we have sufficient power to make the transition nicely.
To that end, despite the STI being very poorly diversified, the STI index may represent a decent way to participate in this macro conclusion, without a lot of hand wringing about what to invest in next. It is top heavy in the 3 local banks. But the 3 local banks are a proxy to Singapore’s economy. When Singapore does well, they do well (up to a point).
Any comments?