Have you heard the news? The Monetary Authority of Singapore had released its latest economic outlook for the country last week in its bi-annual Macroeconomic Review. And, the outlook isn’t pretty – our central bank thinks the economy is going through a cyclical downturn.
Singapore is a small and trade-dependent country and its major trading partners such as China are not doing well. This is compounded by weakness in the oil and gas, semiconductor, and transport sectors here.
In its review, MAS expects Singapore’s economy to grow by only 1% to 2% in 2016. Next year’s growth rate will only be “slightly higher” according to MAS’s forecasters. The quote below sums up MAS’s pessimistic outlook for Singapore:
“The domestic economy has slowed discernibly since the last Review.”
The thing about Singapore’s stock market is that there are companies listed here that do not derive any or much of their revenue from the Garden City. Some of these companies actually do business in other Asian countries that are projected to have much stronger economic growth rates than Singapore, at least over the short term.
One such country is Indonesia. According to a recent World Bank report, Singapore’s southern neighbour is expected to grow its economy by 5.1% in 2016. A listed entity in Singapore’s market with big exposure to Indonesia is Lippo Malls Indonesia Retail Trust (SGX: D5IU).
The real estate investment trust has a focus on retail-related properties in Indonesia and currently has 19 retail malls and seven retail spaces in its portfolio. In the first-half of 2016, Lippo Malls Indonesia Retail Trust saw its gross revenue, net property income, and distribution per unit achieve year-on-year growth rates of 9.6%, 7.5%, and 10.5%, respectively, in Singapore dollar terms.
India is another Asian country that some market watchers think could grow at a much faster rate than Singapore. For instance, the International Monetary Fund expects India’s economy to grow by 7.6% in 2016 and 2017. Another noteworthy thing about India is the size of its market. It has a population of over 1.2 billion.
Healthcare asset owner RHT Health Trust (SGX: RF1U) is a listed entity in Singapore’s stock market that does business solely in India. It is a business trust and currently has 18 assets in total, of which 12 are clinical establishments, four are greenfield clinical establishments and two are operating hospitals. These 18 assets are all located in India.
In the quarter ended 30 June 2016, RHT Health Trust brought in S$35.4 million in revenue, unchanged from the previous year. Its profit however, had dipped by 13% to S$10.7 million.
A Foolish Conclusion
Singapore’s economy is facing some headwinds now. But, investors in Singapore’s stock market have choices that could help reduce their exposure to the economy here if they would like to do so.
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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 contributor Ong Kai Kiat owns units in Lippo Malls Indonesia Retail Trust.