S'pore stocks a safe harbour? Not really, say analysts

SINGAPORE - The Singapore market has historically outperformed other South- east Asian bourses during periods of turmoil, but analysts say that this "safe harbour" is not invulnerable.

This issue has hogged the headlines this week, with the slump of currencies like the ringgit and rupiah and in South-east Asian stock markets including Singapore.

Already, some quarters are drawing comparisons to the Asian financial crisis. Singapore escaped better than its beleaguered neighbours during those dark years, leading to talk that it can be a "safe harbour" again.

Singapore's stock market outperformed South-east Asian shares after the Sept 11, 2001 terror attacks and during the 2009 H1N1 swine flu outbreak, said a Credit Suisse note this week.

However, it added that Singapore has not outperformed the region during some other global events - the global financial crisis of 2008 and 2009, the euro zone crisis of 2010 and 2011, and the 2003 Sars outbreak.

"Historically, (the Singapore market) has outperformed (South-east Asian shares) during periods of regional concern such as the Asian financial crisis, but not during the general global weakness," said Credit Suisse.

Singapore's patchy record as a safe harbour was also highlighted by OCBC Investment Research analyst Carey Wong.

"If the region falls, chances are we will also fall with it," he told The Straits Times. "We would still perform a little bit better, but not to the extent that we can be considered a safe harbour."

CIMB Research analyst Kenneth Ng said in a report that the threat of rising interest rates means that the usual Singapore refuge of real estate investment trusts and telcos "is not that safe either".

Rising interest rates will also affect commodity players, he added.

In addition, several counters have exposure to Indonesia or India - two of the worst-hit markets. Chocolate company Petra Foods, retailer Dairy Farm International Holdings, and lenders OCBC Bank and United Overseas Bank have exposure to Indonesia, Mr Ng said.

SingTel is exposed to both Indonesia and India while DBS Group Holdings has operations in India.

"Our top bank pick remains DBS; it has some Indian exposure, but its peers (OCBC and UOB) are not necessarily safer with their Indonesia exposure," said Mr Ng.

Credit Suisse identified DBS, OCBC, UOB, electronics maker Venture Corp, transport firm ComfortDelGro Corp, insurer Great Eastern Holdings, in-flight caterer Sats, beverage and property firm Fraser and Neave and industrial conglomerate Sembcorp Industries as stocks to take refuge in.

Their valuations are not far above historical averages, and their earnings are less volatile.

jonkwok@sph.com.sg

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