Value creation, S'pore's new mantra after 50

SINGAPORE'S Straits Times Index (STI) has returned a CAGR (compound annual growth rate) of 8 per cent, compared with a nominal GDP CAGR of around 9 per cent, since the inception of the index around 40 years ago. However, during the past five years, Singapore equities have underperformed world equities by around 2,800 basis points.

Strategies of job creation and reliance on government-linked companies (GLCs) that have worked in the past appear to be largely exploited. Singapore's equity market is likely to enter the next 50 years with a fundamentally altered set of conditions. Hence, investors generally struggle to visualise a structural story for Singaporean equities.

Contrary to consensus view, we believe Singapore's equity market is less likely to be marginalised and that recent initiatives have boosted its probability of increasing its global relevance.