S'pore investors still dumping US stocks

Singapore

THE greenback was rising strongly. That is one of the likely reasons why Singaporean and other Asian investors were still unloading US stocks - though in much smaller amounts - as 2015 kicked in, while their US counterparts continued to pile into foreign stocks.

Latest US Treasury data show Singapore-based investors sold a net US$182 million in US corporate stocks in the first three months of the year, the sale easing from the US$2.08 billion in stocks they dumped in the previous quarter.

Sales were already slashed from the third quarter of 2014, a year Singapore investors had spent mostly clearing their US equity holdings.

Asian investors as a whole disposed a net US$1.4 billion in the first quarter of 2015, after divesting a whopping US$16.23 billion in the final quarter of 2014. Globally, net sales of US stocks slipped from US$16.52 billion to US$13.55 billion in the two quarters.

US stock prices tracked by the Standard & Poor's 500 Index rose barely one per cent in the first quarter, against a 5.2 per cent hike in the quarter before. They provided neither the deterrent to buy nor the incentive to sell.

But the US dollar, measured against other major currencies, hit its highest level in mid-March, according to global investment management firm T Rowe Price. That would have made US dollar-denominated assets like US stocks expensive for foreign investors to buy. It would make more sense to sell them for a profit instead.

US Treasury bonds, which are debt instruments, would be even more unattractive to hold because of low US interest rates. The latter reinforces the strong dollar in making T bonds pricey for buyers while lowering the yields for investors.

Thus global investors shunned T bonds even more in the first quarter. US Treasury figures show they liquidated a net US$47.34 billion of the debt instruments in that quarter, after selling US$16.52 billion in the fourth quarter of 2014.

Asian investors, who previously invested a net US$9.04 billion in T bonds, unloaded US$6.12 billion of their holdings.

Singapore investors remained mavericks in their position, buying when others were selling and vice versa. They acquired a net US$6.24 billion in T bonds in January-March, more than the US$6.04 billion they dumped in the previous quarter.

Perhaps the investors wanted to spread their risks, or they believed the US Federal Reserve would keep interest rates down for some time, which meant T bonds wouldn't get cheaper for a while.

Capital Group, one of the world's biggest investment managers, also points out that compared to major markets in Europe and Japan, where yields dipped to record lows, US bonds continued to appeal to investors for their "relative value".

The strong greenback, on the other hand, kept US investors busy accumulating foreign stocks in the first quarter of the year, when the MSCI World Index, a common benchmark for global stocks' performance, jumped 2.3 per cent in US dollar terms and 4.9 per cent in local currencies.

According to US Treasury numbers, US investors snapped up a net US$39.07 billion in foreign stocks in the first quarter, up from US$38.95 billion in the previous quarter.

But US investors' appetite for Asian stocks eased between the two quarters as the MSCI Asia Index excluding Japan climbed 4.9 per cent. Their net purchases of Asian equities moderated from US$15.59 billion to US$11.10 billion.

US acquisitions of Hong Kong stocks were cut more than half to a net US$2.19 billion. For South Korean stocks, US investments in the first quarter dropped from a net US$9.19 billion in the preceding quarter to US$1.96 billion.

US investors bought a net US$1.68 billion worth of Singapore stocks in the first quarter, against US$4.24 billion in the previous quarter.