In the current economic environment, where inflation consistently exceeds the preferred 2% benchmark, Singapore finds itself in an era-defining position.
As central banks globally indicate a commitment to maintain heightened interest rates for an extended duration, the profitability landscape for businesses appears increasingly complex.
However, this shifting paradigm also reveals an array of promising investment opportunities for the Lion City.
Dive in as we uncover the silver linings amid this shift in dynamics and explore Singapore’s promising investment opportunities.
Banking: Stability meets growth
Singapore bank stocks have been local investors’ favourite choice on the back of rising interest rates and their profitable loan books.
However, with the talk of “peak rates” and rising funding costs, investors are predominately concerned about whether the three leading local banks – DBS Group Holdings Ltd (SGX: D05), United Overseas Banks Ltd (SGX: U11) and Oversea-Chinese Banking Corporation Limited (SGX: O39) – which together constitute almost 50% of the Straits Times Index (STI)’s weight, can sustain their robust margins.
However, the local banks will likely benefit from the significant wealth inflows into Singapore, with the city state often perceived as a safe haven during global instability.
The stability offered by the banks, their dividends and growth in selected areas could help to drive sustainable value for investors in the long term.
Consumer goods: A refreshing prospect
The consumer goods sector will also benefit from the recovery in the region.
While higher interest rates could drag on consumers’ disposable income, the end of the interest rate hike cycle could allow consumers to adjust to this new environment.
The broader rise in consumer wages will also benefit the consumer goods sector.
Thai Beverage Co Ltd (SGX: Y92) is one of the consumer goods players that could benefit from this recovery.
With a price-to-earnings ratio (PE) of 12 times, Thai Beverage is also trading at an attractive valuation.
The company’s robust distribution network in ASEAN allows it to benefit from the recovery in the region.
Aside from that, ComfortDelGro Corporation Ltd (SGX: C52) is also another stock that could benefit from its dominance in the public transportation industry in Singapore.
While ComfortDelGro has reported weaker-than-expected earnings over the past few quarters, the land transport operator has built up a strong net cash position to support its business.
ComfortDelGro’s fleet of taxis has also stabilised despite the decline in taxi fleet numbers over the past few years.
With the return of tourists into Singapore and a significant bus contract win in Australia, a turnaround for ComfortDelGro is on the horizon.
Exchanges and treasury: Stability and growth
Singapore Exchange Limited (SGX: S68), the sole stock exchange operator in Singapore, provides an intriguing investment narrative because of its core operations and evolving treasury income capabilities.
As the exchange diversifies its revenue streams, it can offer both stability and growth to discerning investors.
Singapore Exchange, or SGX for short, also distinguishes itself in the regional landscape through its multi-asset platform, garnering attention from international investors.
Looking ahead, SGX aims to pioneer further innovations, enhancing its connections across the region and forging deeper ties with prominent regional economies.
To date, its growth trajectory has surpassed anticipations. Coupled with a robust dividend history and esteemed reputation, SGX stands as a compelling consideration for investors plotting their long-term investment strategies.
REITs and real estate: A mixed bag of opportunities
The property sector is another interesting sector to look at.
While rising interest rates could hurt profitability for Singapore REITs and hurt demand for properties, there are exciting opportunities for investors.
CapitaLand Ascott Trust (SGX: HMN) presents promising growth amid a rebound in travel globally that has led to a dramatic recovery in its revenue per available room (RevPAR) post-pandemic.
It also offers an attractive 12-month forward yield of 5.8% for dividend-seeking investors.
Aside from that, Frasers Centrepoint Trust (SGX: J69U), which is known as FCT for short, is also another standout S-REIT in the retail segment with its all-time high occupancy rate and efficient operations.
Despite the rising interest rate environment, Frasers Centrepoint Trust has ensured stable distributions as it has managed to maintain its operational cost level.
Meanwhile, for the property players, City Developments Limited (SGX: C09), or CDL, showcases how adaptability can lead to profitability.
Despite facing market headwinds, its pivot towards novel sectors such as student accommodation signifies proactive strategy implementation.
Recently, CDL also announced the acquisition of the 408-room Nine Tree Premier Hotel Myeongdong II in South Korea for approximately S$143.9 million.
The purchase is the group’s second hotel acquisition in 2023.
Navigating the future with caution
Singapore’s market landscape, amid its current challenges, offers discerning investors multiple avenues for potential growth.
While uncertainties are inherent in investing, leveraging in-depth research and strategic foresight can unlock significant value.
Singapore’s diverse sectors, from banking to real estate, present challenges and opportunities.
The rewards can be substantial for those equipped with the right insights and patience.
Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.
