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2014: A Year Of Two Halves

If the Singapore stock market was a football match, its performance in 2014 could be described as a game of two halves. The first six months of the year was uneventful. This was followed by an equally mundane start to the second six months of the year. But as 2014 drew to a close, the stock market roared into life.

Between the middle of October and the end of November, the Straits Times Index (SGX: ^STI) surged over 200 points. Then it lost around 100 points in just a handful of trading weeks before recouping the losses again.

Oil explorers, oil services companies and just about anything remotely connected with oil were on the back foot by the end of December, as oil prices plunged. No one quite knows why crude prices fell. However, there have been plenty of theories that have attempted to explain the drop.

With the benefit of hindsight, some might point to the warning signs for oil during the summer months of 2014. In July, crude prices trickled down from $100 a barrel to about $90. But there was nothing at the time to suggest the collapse from $90 to around $55 a barrel.

The drop in crude prices saw Sembcorp Marine (SGX: S51) lose around a quarter of its value in 2014. Elsewhere, oil services company Ezra Holdings (SGX: 5DN) shed around 60% of its value and Ezion Holdings (SGX: 5ME) lost over a third of its market capitalisation.

Away from Singapore, BP dropped by a more modest 14%. Interestingly, the fall in oil prices could even benefit the integrated oil giant. BP generates around 80% of its revenues from downstream operations. In other words, it makes most of its money from processing oil. Consequently, lower oil prices could help cut its input costs significantly.

However, BP also has significant exposure to Russia, through its 20% stake in Rosneft. Unfortunately for BP, the problems at Rosneft go beyond falling oil prices. It has been impacted by Western sanctions over Ukraine and compounded by the plunging value of the Russian rouble.

In 2014, the Russian currency has lost nearly 50% of its value. At the start of the year, US$1 would have bought around 33 roubles. By December, that had almost doubled to around 57 roubles.

Aside from oil, commodity companies have been under the cosh this year over concerns that China’s economic growth might be slowing. China is still expected to grow around 7.5% this year. But it is already talking down growth expectations for next year, when growth could be around 7%.

That does not bode well for farmers. Palm-oil company, Golden Agri-Resources (SGX: E5H), has lost around a-sixth of its market value this year, while GMG Global (SGX: 5IM) shrank 40%. Halcyon Agri Corporation (SGX: 5VJ) is down about a-fifth.

But it hasn’t been a total disaster for the Singapore market. Only around a-third of the constituents of the Straits Times Index has lost ground this year. Some of the best performing shares in 2014 have been property companies in their various guises. Developer Hongkong Land (SGX: H78) has increased by nearly 20%, while CapitaLand (SGX: C31) gained almost 7%.

Real Estate Investment Trusts have also performed well in 2014. Suntec REIT (SGX: T82U) has seen its market value climb by over a quarter. Its stellar performance was closely followed by two other Singapore property companies, namely Mapletree Commercial Trust (SGX: N2IU) and CapitaCommercial Trust (SGX: C61U). Their standout performances this year could be due to the continuing interest in property and their attractive dividend yields.

As a whole, the Singapore stock market performed well 2014. The Straits Times Index is up about 6% but the total return, which includes dividends, is a more respectable 8.5%.

Currently, Singapore shares are valued at around 13 time earnings, which is not overly expensive, provided Singapore companies can continue to grow their profits. Many companies have shown that they can do that, which augurs well for Singapore shares in 2015 and beyond.

A version of this article first appeared in the Independent on Sunday.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.