Singapore’s stock market has been one of the stronger performers in the Asia region in recent months and that strength looks set to continue well into 2022, according to Morgan Stanley.
The investment bank initiated overweight positions to Singapore for the first time in many years in 2021 and Jonathan Garner, Morgan Stanley’s chief Asia and emerging-markets strategist, has confirmed the firm’s conviction in Singapore stocks remains firmly in tact.
“We were bullish on it (the Singapore market). Last year and we carried that over into a strong overweight for this year,” he told Bloomberg Markets.
In 2022 Garner believe Singapore’s main index, The Straits Times Index will benefit from a rotation to value-oriented stocks and the robust Singapore economy.
“It (the Index) has a very strong value component at the sector side of things, in particular some very strong banks in the index.
“It (Singapore) has got a rock solid external position, running very substantial current account surpluses. And it has got this, I would characterise as a sort of creative approach at managing COVID, which is going to see it well over the medium to long term.”
Singapore stocks and strategic portfolio allocations
Aside from the compelling growth picture Morgan Stanley paints when it comes to Singapore stocks, the firm also sees the city-state market as being an attractive way to protect clients portfolios against falling U.S. stocks.
“It has low Beta, and bear in mind the Morgan Stanley house view is that the S&P 500 goes to 4,400, so we definitely want low beta, Says Garner.
Beta refers to the correlation an asset has with the broader market. The low Beta of Singapore stocks compared to the U.S., means when the U.S market falls the Singapore market historical remains less volatile.
Singapore banks shine
Over the past 12 months, Singapore’s listed banks, which dominate the top end of the Singapore Exchange have been stellar performers.
DBS Group Holdings (SGX: DO5) has gained 37%. The multinational banking institution is largest company by market cap on the Singapore Exchange.
OCBC Bank (SGX: O39), which is the second-largest company on the Singapore exchange by market cap, has gained around 16%.
United Overseas Bank (SGX: U11) is the Singapore Exchange’s third-largest company by market cap. Its stock price has risen close to 30% in the past 12 months.
Related: 6 Singapore REITs that could be COVID recovery plays.