18 Sep 2024
Investment managers Jason Pidcock and Sam Konrad explain why they like Singapore, as it offers emerging market exposure with developed market quality and governance.
The Asia Pacific (ex Japan) region offers a broad range of compelling income and growth opportunities in both developed and emerging markets, across sectors.
Along with Australia and Taiwan, we view Singapore as one of the most attractive developed markets within the region. Singapore provides a unique blend of developed and emerging market exposure: as well as offering developed market quality and corporate governance, it also acts as a gateway to large, growing emerging markets in the rest of Southeast Asia.
Asia’s powerhouse?
Singapore boasts the highest GDP per capita in Asia, arguably making it Asia’s most developed economy. It has a stable political system, and a progressive, well-functioning legal and regulatory framework, which is transparent and business friendly. It is home to a range of well-managed companies with strong corporate governance – many of whom are willing, and able, to pay out attractive dividends – and it is known worldwide as being a great place for expatriates to live and for businesses to operate from.
From a geopolitical point of view, Singapore is well positioned too, as it enjoys good relations with most of the world. Many multinational companies want to operate from Asia, and Singapore is increasingly becoming the preferred location for global businesses. It has been taking market share from Hong Kong, a trend that we believe is likely to continue, partly due to ongoing tensions between the West (particularly the US) and mainland China.
Gateway to Southeast Asia
Singapore also functions as a gateway to Southeast Asia, offering exposure to large, growing emerging markets in the region like Malaysia, Thailand, the Philippines and Vietnam, while adhering to high governance and regulatory standards.
By investing in Singapore instead of making direct investments in its neighbouring countries, we do not have to take on some of the risks associated with political systems that are not as conducive to long-term investment, liquidity that is often not as high, and valuations that are not as attractive when compared to their respective 10-year government bond yields.
Diverse opportunities
In the Jupiter Asian Equity Income strategy, we are top-down stock pickers, taking into consideration the macroeconomic environment to help us identify which countries we want to invest in. Then, within those countries, we look for the best “quality income” opportunities – companies that are highly liquid, with strong balance sheets, good governance, solid barriers to entry, and an ability to pay and grow dividends.
Given the attractive quality income opportunities available there, we have been overweight Singapore for some time. The four Singapore-listed companies we hold all operate in very different industries from one another, with no overlap, offering diversification.
Singapore Telecommunications (“SingTel”): SingTel is a top 10 holding in the strategy, which has performed well year to date. We believe the business is well managed and we applaud its focus on maximising value from its portfolio of investments and dividend policy. As well as being Singapore’s dominant telecommunications operator, it also owns Singapore’s second largest network in Australia (Optus) and has large stakes in Bharti Airtel in India, Advanced Info in Thailand, Telkomsel in Indonesia and Globe in the Philippines.
DBS Group: DBS is one of the largest regional banks in Asia Pacific, and it is often voted the best bank in Asia. It derives its earnings from across the region – from India, through Greater China and across Southeast Asia. It offers a generous dividend yield, and it does not look expensive to us, despite the strong outperformance of its share price.
ST Engineering: ST Engineering is the world’s largest airline maintenance, repair and overhaul (MRO) business. It benefits from more air travel within Asia, as well as into and out of the region. It also has a defence arm of its business, which is receiving more orders as governments are increasing their spending on defence. It also operates a Smart City business, which has won contracts in Singapore and elsewhere.
Genting Singapore: Genting Singapore is one of two casino operators in Singapore. It manages a large integrated resort which includes theme parks, such as Universal Studios, and helps to attract tourists to Singapore from across the region. We like its seven-year remodelling plan and are comforted by the large net cash position on its balance sheet.
The best of both worlds
Singapore offers a unique combination of developed market quality and governance and exposure to growing emerging markets in Southeast Asia. With a stable political environment, transparent legal framework and strong corporate governance, Singapore provides a favourable business environment for both Asian and multinational companies. We are able to identify a number of attractive “quality income” opportunities in Singapore, across sectors, providing us with diversified exposure. We believe each of these companies has the potential to continue to grow their businesses and to deliver attractive, and growing, income streams.
The value of active minds: independent thinking
A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.
Important information
This document is intended for investment professionals* and is not for the use or benefit of other persons, including retail investors. This document is for informational purposes only and is not investment advice. Company examples are for illustrative purposes only and are not recommendations to buy or sell. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. The views expressed are those of the individuals mentioned at the time of writing, are not necessarily those of Jupiter as a whole, and may be subject to change. This is particularly true during periods of rapidly changing market circumstances. Every effort is made to ensure the accuracy of the information, but no assurance or warranties are given. Issued in the UK by Jupiter Asset Management Limited (JAM), registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ is authorised and regulated by the Financial Conduct Authority. Issued in the EU by Jupiter Asset Management International S.A. (JAMI), registered address: 5, Rue Heienhaff, Senningerberg L-1736, Luxembourg which is authorised and regulated by the Commission de Surveillance du Secteur Financier. No part of this document may be reproduced in any manner without the prior permission of JAM/JAMI/JAM HK.
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