What are the Benefits of Investing in the Singapore Stock Market?

December 27, 2022

It is normal for Singaporean investors to be looking at overseas stock market. That’s because many people say they offer more exciting growth prospects.

This is unsurprising since the local stock market in Singapore has less than 700 listed companies to choose from.

It also has a lack of exciting technology giants such as Microsoft Corporation (NASDAQ: MSFT), Apple Inc (NASDAQ: AAPL), Meta Platforms Inc (NASDAQ: FB) and others like them.

However, if you have been investing in the Singapore stock market over the last year, you will find your portfolio to be relatively more resilient as compared to those who invest in these growth stocks in the US.

In fact, Singapore’s equity benchmark, the Straits Times Index (STI), has outperformed most stock markets in 2022, including those in developed markets.

I believe that investors should not overlook the opportunities in the Singapore stock market and here are three reasons why we should all have some exposure to the local market.

1. No capital gains tax in Singapore

When you invest in the Singapore stock market, there is no capital gains tax.

This means that both your dividends and capital gains will not be taxed.

This is unlike in the US, where you will be charged with a 30% withholding tax on all dividends paid out to you.

As an investor, you will keep everything you earn and this gives you a huge advantage over the long term.

Aside from that, investing in the home market usually saves you from the other extra brokerage charges, such as custodian fees or exchange rate fees.

2. Singapore stock market consists of resilient names

While the Singapore stock market may not be home to large tech giants such as those in the US, there are still plenty of great companies to choose from.

In fact, the STI has had a resilient performance, supported by strong names in the financials sector, Singapore real estate investment trusts (S-REITs) and telecommunications.

For example, the three largest banks in Singapore, DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corporation Ltd (SGX: O39) and United Overseas Bank Ltd (SGX: U11), accounted for about 50% of the STI. This has provided stability to the stock market index.

These companies have strong exposure to both Singapore and the broader Asia region.

Meanwhile, S-REITs are known for their consistent dividend payouts that allow investors to build long-term wealth.

Outside of the STI, there are also strong technology companies and other companies that show promising growth prospects.

While some may see the Singapore market as boring, I believe it provides stability that investors need – especially with the rising global recession risk in 2023.

3. Singapore’s economy is strong and continues to offer political stability

Another reason why we should consider the Singapore stock market is the strong economy.

The domestic economy in Singapore continues to grow at a steady rate and its economy was the first to recover from the COVID-19 pandemic, among those in the Southeast Asia region.

Singapore is also competing with Hong Kong to replace it as the financial hub in the region, as it takes advantage of the prolonged COVID lockdown and political instability in Hong Kong.

In comparison with other markets in the region, Singapore also has a more stable political environment.

The country is involved in high-technology, value-add areas, including the manufacturing and biotechnology industry.

Last year, leading premium smart electric vehicle producer NIO Inc. (NYSE: NIO) (SEHK: 9866) (SGX: NIO) and the biggest whisky company in Philippines and largest brandy company in the world, Emperador Inc. (SGX: EMI), both opted for a secondary listing on Singapore’s stock market, reflecting investors’ interest in Singapore.

Opportunities to build a resilient portfolio with Singapore stocks

As an investor, I think that Singapore stocks will help investors to build up resilient investment portfolio as many companies listed here pay consistent dividends and offer decent growth opportunities.

The low fees and tax-free environment will be an advantage to investors over the long term.

With the uncertainty in global stock markets, this could be a good opportunity for long-term investors to accumulate stocks listed in Singapore.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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