If you are an active reader or viewer of business news, you may realize there is always something to worry about at any given day or time. Although much of those of worries are just noise for long-term investors, we also need to learn how to identify the risks that can seriously affect our investments. Here are three risks that Singapore investors may want to keep their eyes on. Singapore’s port and the oil & gas industry Prime Minister Lee Hsien Loong mentioned in a recent speech that the sea is the lifeline of Singapore. And two of the most…
If you are an active reader or viewer of business news, you may realize there is always something to worry about at any given day or time.
Although much of those of worries are just noise for long-term investors, we also need to learn how to identify the risks that can seriously affect our investments. Here are three risks that Singapore investors may want to keep their eyes on.
Singapore’s port and the oil & gas industry
Prime Minister Lee Hsien Loong mentioned in a recent speech that the sea is the lifeline of Singapore. And two of the most important industries that are connected to the sea for Singapore are its ports and the oil & gas industry. The Garden City has one of the highest trade to GDP ratios in the world, and the oil & gas industry contributed 5% to the economy in 2007.
Yet, these two areas could be under threat for Singapore because of developments in Malaysia.
Singapore’s northern neighbour is building an Integrated Petroleum Complex in Pengerang, Johor. The project comprises a range of oil and gas downstream facilities, from storage, refineries, petrochemical plants, to LNG regasification plants. These are very similar to what Jurong Island in Singapore is offering at the moment.
Malaysia’s project has also attracted the interest of Saudi Arabian Oil Company (Saudi Aramco), which is the world’s largest oil and gas company. Saudi Aramco has indicated its interest to take up a 50% stake in the project from PETRONAS, Malaysia’s national oil company.
The complex is scheduled to come online in 2019. If it is successful, it could be a direct threat to the oil & gas businesses conducted on Jurong island.
Meanwhile, Singapore’s container port has been facing declining volume over the past few years. Yet, ports in Malaysia – from Port Klang to Johor’s Port of Tanjung Pelapas – are experiencing strong growth.
Investors would need to think about what it means for the economy of Singapore if two of its key economic engines are facing such direct threats.
The sustainability of the US recovery
The US is on the road to recovery. Just last week, the US reported that its jobless rate dropped to 4.4% in April, a 10-year low. Many investors are optimistic as seen in the strong performance of the US stock market in recent months. However, with optimism potentially comes greed and over-confidence. If the US economy is to face some headwinds ahead, it could affect most countries, including Singapore.
Just because investors are hopeful of a strong US recovery to persist does not make the scenario true. Investors still need to watch the progress of the world’s largest economy going forward.
The threat of North Korea
China had been acting as a “big-brother” of sorts to the reclusive North Korea for the past few decades. But in recent years, the relationship between the two countries has displayed signs of strains.
North Korea is pushing ahead with its nuclear ambitions and China does not appear to be thrilled about it – last month, China sent back coal shipments that were from North Korea. Admist all this is hostility toward North Korea from the Trump administration in the US.
Many investors tend to underestimate the possibility of a war. However, as history has shown, a very small spark can start a very big war. (War World I was triggered by the assassination of Archduke Franz Ferdinand of Austria by a Bosian Serb nationalist). And, the Syrian civil war has shown how damaging a war can be not just for the affected country itself, but also for the entire region. (It is worth noting that Syria had a GDP per capita of around US$2,000 in 2007, which is at a similar level to Indonesia and higher than Vietnam back then.)
Investing in the stock market is about managing risk. We do not have to have sleepless nights over the list of things that can mess up our investments. However, we do need to be aware of them and make sure we monitor the situation as time goes by.
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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 Stanley Lim doesn’t own shares in any companies mentioned.