Singapore stocks near record high as Iran war fuels haven status
Trump said the US will begin blockade of Hormuz, setting the stage for more global market turmoil
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SINGAPORE stocks are close to reclaiming their record high, with the country’s assets seen as a haven in the face of global volatility.
Equities in the city-state have suffered the least in the region since the outbreak of the Iran war in late February sent global energy prices soaring.
They are on the cusp of being the first major Asian market to reclaim new highs since, aided by the Singapore dollar’s outperformance versus South-east Asian peers.
The US and Iran failed to reach a deal over the weekend, and President Donald Trump said the US will begin a full naval blockade of the strategic Strait of Hormuz, setting the stage for a renewed bout of global market turmoil.
Singapore has a couple of factors in its favour. One, its Equity Market Development Programme (EQDP), created last year, is expected to pour in billions of dollars to boost valuations and appeal to investors.
Two, the composition of Singapore’s main stock index adds to the appeal, with high dividend-paying stocks such as DBS Group and Oversea-Chinese Banking Corp making up more than 40 per cent of the gauge.
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“The relative strength of the Singapore dollar offers safe-haven status” to local equities, said Daniel Lau, a fund manager at Eastspring Investments in Singapore. The EQDP efforts offer valuation support amid the global uncertainty as well, he said.
The Straits Times Index is broadly unchanged from the beginning of the war, compared with a 4.9 per cent drop in MSCI’s Asian gauge. Asian stocks are still nearly 5 per cent away from erasing the losses from the conflict.
That said, the city-state’s stock market has underperformed Asian stocks this week after a ceasefire announcement triggered a relief rally globally.
The region’s rebound, led by technology stocks, has brought Taiwan’s stock market close to surpassing its previous record – and an end to the war might bolster gains for tech, putting Singapore at a relative disadvantage.
Still, analysts bet that further strength in the currency could provide a platform for more gains as geopolitical uncertainties drive investors to chase diversification.
The Singapore dollar may get a boost from a possible tightening by the Monetary Authority of Singapore at its meeting on Tuesday (Apr 14) – likely via increasing the appreciation of the Singapore dollar against the basket of currencies of its main trading partners.
“Singapore is at the intersection between safe-haven flows – especially amid Middle East uncertainties – and domestic liquidity drivers brought about by market reforms and a construction boom,” said Thilan Wickramasinghe, head of research at Maybank Securities. “This is supporting Singapore equities to buck the trend compared to global equities.” BLOOMBERG
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