Singapore stocks bounce past lockdown to outperform Asian peers

·2 min read
Singapore's city skyline is seen as visitors take photographs from the rooftop bar of the National Gallery on January 13, 2020. (Photo by Roslan RAHMAN / AFP) (Photo by ROSLAN RAHMAN/AFP via Getty Images)
The benchmark Straits Times Index has risen almost 1% in July, snapping two months of losses, even after the latest virus outbreak. (PHOTO: ROSLAN RAHMAN/AFP via Getty Images)

By Eric Lam

(Bloomberg) — Singapore stocks are defying the nation’s latest lockdown, as traders bet that rising vaccination rates lead to a reopening of the economy.

The benchmark Straits Times Index has risen almost 1% in July, snapping two months of losses, even after the latest virus outbreak swept through karaoke lounges and a fishery port. While the spread of the virus has prompted new restrictions, the government is holding onto plans to reopen the economy after vaccinating two-thirds of the population.

“Investors see the outbreak as being brief and that with rapidly rising vaccinations in Singapore, reopening will continue — allowing for an ongoing economic recovery and rising profits,” said Shane Oliver, head of investment strategy with AMP Capital Investors in Sydney.

Oliver added that with the delta variant spreading, the goal for vaccination rates in the Southeast Asian nation “may need to be shifted to 80%” of the population. He noted, though, that as long as the rate “continues to head rapidly in that direction”, investor optimism around Singapore shares will stay high.

As of July 23, about 49% of the country’s population has been fully vaccinated, according to Bloomberg’s vaccine tracker.

Singapore’s benchmark index had earlier capped two straight quarters of greater-than-10% gains for the first time since 2009 on the back of the wider reflation trade, when investors flocked to value stocks. The country’s stock market is dominated by old economy and cyclical shares, making it more dependent on how the nation copes with infections than tech or commodity-oriented markets in the region.

Still, even with rising locally transmitted infections in the country, the Straits Times Index has outperformed the benchmark MSCI Asia Pacific Index, which has fallen around 3% this month.

The gap in performance between the two is at its widest since March, as many other Asian countries struggle to match Singapore’s vaccination rate. As a region, Southeast Asia’s overall inoculation rate was under 10% as of mid-July, with outbreaks worsening in countries like Indonesia and Thailand.

Setbacks to Singapore’s reopening strategy are “likely temporary” as the country accelerates its vaccine rollout, according to Arthur Pineda, an analyst with Citigroup Inc.

“Optimism on key reopening trades — transport, tourism, telecommunications, commercial and office REITs — will likely be pushed back, but we see this as an opportunity, post the initial disappointment,” he wrote in a recent report.

The current bout of Singapore restrictions — which bans dining in restaurants and restricts gatherings while keeping workers at home — may put pressure on stocks. But Pineda said he is sticking with his key picks, including CapitaLand Integrated Commercial Trust and Singapore Telecommunications Ltd.

“Corrections are viewed as longer-term opportunities,” he said.

© 2021 Bloomberg L.P.

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