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3 Singapore Market Investment Themes in 2019

Financial markets have become increasingly volatile in recent years for a number of reasons. With the change in global dynamics, here are three Singapore market investment themes investors should pay attention to in 2019.

Volatility

The US Federal Reserve is expected to hike interest rates twice in 2019 whereas the European Central Bank has stopped its quantitative easing policy as of December 2018.

ECB’s QE policy has pumped an estimated €2.6 trillion of stimulus into the EU economy. Overall, monetary policies are expected to tighten in 2019, and global economic growth is expected to slow especially if the US-China trade tensions escalate.

All of the above adds to the increase in volatility which should benefit safe assets such as fixed income securities and government bonds.

Rising Interest Rates

There is a strong correlation between two of Singapore’s reference interest rates (the SOR and the SIBOR) and the US Fed Funds Rate. As the US Fed Funds Rate is expected to increase to 3% by end-2019, both the SOR and SIBOR are also expected to increase. Financial entities like banks, insurance companies, brokerage firms and money managers generally benefit from higher interest rates.

This could be the time for investors to actively rebalance their existing portfolio away from companies that are highly leveraged and require refinancing within the next two to three years. Real estate investment trusts (REITs), in particular, are asset-heavy investments that need high levels of debt financing. Some REITs have seen share prices fall over 20% in 2018 following their rights issue (cash calls) to acquire new assets.

Ageing Singapore Population

As of 2018, nearly 500,000 Singaporeans are aged 65 and older, and this number is expected to climb to 900,000 by 2030. An ageing Singapore population will be a persistent investment theme regardless of turbulence in the financial markets.

Healthcare is the sector that will see the most impact from this demographic shift. Particular attention should be paid to pharmaceutical and medical technology companies with a focus on cardiovascular diseases, diabetes and gout. These are chronic diseases which are more prevalent in a developed country like Singapore.

Two big trends in healthcare are the rapidly rising costs and increased demand for annuities. Annuities are financial products that convert invested funds into regular payments usually payable up to the death of the beneficiary. Investors must pay attention to health and life insurers as their market size will continue to grow not only locally but also on a global scale in years to come.

Finally, the fundamental market outlook for senior care providers and consumer companies such as healthcare REITs and casino/gaming companies should remain strong. The family size in Singapore is rapidly shrinking, and elder care is often outsourced. Older Singaporeans are also staying economically active and have higher disposable income compared to earlier generations.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.