5 Hot Investment Themes in Singapore Amid Market Volatility

March 30, 2023

Investors in Singapore are seeking stable investment opportunities, even as global recession risk and central banks’ policies keep markets volatile in the near term.

Singapore, with its robust economy, political stability, and strong financial market infrastructure, has become a popular investment hub in Asia.

I believe that investors will find better value in the Singapore stock market by focusing on companies that are higher quality in nature, backed by resilient earnings growth and strong financials.

Here, I’ll outline five promising investment themes in Singapore that are expected to withstand the current market turbulence.

1. Banking stocks

Despite the banking crisis in the US, Singapore banks remain resilient, backed by strong corporate governance and risk management.

United Overseas Bank Ltd (SGX: U11) does not have any holding in Credit Suisse’s AT1 bonds while DBS Group Holdings Ltd (SGX: D05) and Oversea-Chinese Banking Corporation (SGX: O39) said that their exposures are insignificant.

Aside from that, the banking trio are likely to maintain their earnings growth, supported by the expansion of net interest income (NII).

The banking stocks in Singapore are also likely to benefit from some of the wealth business outflows following Credit Suisse’s takeover by UBS.

2. Defensive stocks that are resilient

Investors are afraid that a recession is on the horizon and could be accelerated by the banking failures that we have seen in recent weeks.

This is why it is important to look for “recession-proof” stocks that have resilient and defensive earnings.

Among them in Singapore is Sheng Siong Group Ltd (SGX: OV8), which is Singapore’s largest supermarket chain operator.

During recessions, consumers tend to shop at discount retailers and supermarket chains that are perceived to offer good value, such as Sheng Siong.

Aside from that, the healthcare players in Singapore such as Raffles Medical Group (SGX: BSL) and Parkway Life REIT (SGX: C2PU) are also suitable for investors who are looking to shore up their portfolio with defensive stocks.

3. Beneficiary of China’s reopening

China reopened its international borders at the beginning of this year and Singapore is one of the key beneficiaries of the return of Chinese tourists.

Singapore’s flagship airline carrier, Singapore Airlines Ltd (SGX: C6L), is among the key beneficiaries of this theme.

The reopening will boost its earnings recovery and allow Singapore Airlines to maintain its elevated earnings amid the return of travel.

Aside from that, the resurgence of Chinese tourists visiting Singapore is poised to have a positive impact on Genting Singapore Limited (SGX: G13), the owner and operator of the esteemed Resorts World Sentosa (RWS) Integrated Resort.

RWS houses one of only two casinos found in Singapore.

RWS boasts an array of attractions, including the SEA Aquarium, Universal Studios, its renowned casino, and a selection of upscale hotels.

Other key beneficiaries include DFI Retail Group Holdings Ltd (SGX: D01), a leader in the health & beauty retail segment in Hong Kong, as well as CapitaLand Ascott Trust (SGX: HMN), a leading hospitality trust in the Asia-Pacific region.

CapitaLand Ascott Trust is the largest lodging trust in the region with a portfolio across 15 countries.

4. Rotation into S-REITs

Singapore REITs have been severely affected by the rising interest rate environment over the last 12 months.

However, as we approach the peak of the interest rate cycle, investors can take advantage of the market weakness and buy some of Singapore REITs.

That’s particularly true for those that have high-quality assets, a strong track record of increasing distribution per unit (DPU) and are backed by a robust sponsor.

This includes CapitaLand Integrated Commercial Trust (SGX: C38U), a commercial and retail REIT in Singapore with an attractive distribution yield of 5.5%.

CapitaLand Integrated Commercial Trust was also the first REIT listed on the Singapore Exchange and has since grown to be the largest of its kind in Singapore with a market capitalisation of S$12.9 billion.

Aside from that, Mapletree Logistics Trust (SGX: M44U) and Frasers Logistics & Commercial Trust (SGX: BUOU) are also S-REITs with strong track records, high-quality assets and backed by strong sponsors.

5. Sustainability-focused investment

Green, or renewable, energy is set to become the investing megatrend going forward.

Investors who are looking for sustainability-focused investments will find Sembcorp Industries Limited (SGX: U96) to be an attractive option.

In fact, Sembcorp Industries’ shares have continued to outperform this year despite the market volatility.

While the blue-chip utility company enjoying a lift from higher natural gas prices in its conventional energy unit, Sembcorp Industries has also been actively pushing into the renewable energy space as well.

Over the past month, Sembcorp Industries has announced a series of related ventures and deals to expand its footprint in the green energy sector.

Aside from that, other options include Lendlease Global Commercial REIT (SGX: JYEU), which was the first S-REIT to attain net-zero carbon in 2022, three years ahead of its target of 2025.

On the social front, it has a target to create A$250 million (S$230 million) of social value by 2025.

Singapore market offers diverse range of investment opportunities

In conclusion, the Singapore market presents a diverse range of investment opportunities that can also withstand market volatility amid global recession risks and fluctuating central bank policies.

By focusing on the above five key themes, investors can find value in Singapore’s robust economy and stable financial infrastructure.

These themes include banking stocks with strong corporate governance, defensive stocks resilient to potential recessions, beneficiaries of China’s reopening, a rotation into the REITs sector, and sustainability-focused investments.

By exploring these themes, investors can diversify their portfolios and capitalise on Singapore’s promising market prospects, even during turbulent times.

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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