With John Hampson
Today we head into Malaysia for 2 nights in Melaka and then on to Kuala Lumpur.
Singapore – what a great place. One of the notable few where the lack of land and natural resources has in no way impeded its economic development. It may have a hybrid ruling system, not fully democratic, but it is clear the government has achieved great things for the city-state. It is the 4th top financial centre in the world, the 5th largest trading port, and has a deliberately varied economy so it is not too reliant on one sector. It is amongst the least corrupt countries in the world with a very high standard of living. 20% of its inhabitants are millionaires, the highest ratio for a country. It is in the top 10 countries in the world in terms of its financial reserves and is a world leader in technology. There are rules to adhere to – no littering, spitting, jaywalking, racist slurs, and more – and capital punishment for certain misdemeanors, but the net result is a country that is very safe, respectful and clean. Customer service is also of a very high standard and feels very genuine.
For me personally, the English language, left-hand driving and English products around gives it an instant familiarity – all thanks to the colonial history – but the 30 degree constant heat, exotic plants and animals, and multi-Asian influences made it feel equally exotic. There are now 5 million people living in the 274 square mile land mass, but is doesn’t feel overcrowded, but vibrant, and it is sufficiently cosmopolitan not to stand out as a tourist. I spent an evening with a portfolio manager who lives here and he stated that the population had really grown over the last decade thanks to an influx of foreigners. The result has been a ballooning of real estate prices, shown by the red line in the chart below.
Underlying source: SingaporePropertyCycle
The chart also shows the Singapore STI stock index, and I have added the price/earnings valuation history at the key peaks and troughs. It can be seen that there was one historic episode of a speculative mania to valuation excess, around 2000, tying in with the dot com peak. Since then we can see the global secular stocks bear market unfolding in terms of gradually cheapening valuations, even though the nominal index has an upward slant overall. Like other key indices, such as the Hang Seng and UK FTSE, it has formed a large triangle, which I have highlighted, and is likely to resolve one way or the other soon. I suggest, like the other indices, that this is going to resolve to the upside, with a breakout, pullback to the midpoint (triangle nose), and then a couple of years hence, break upwards from there into momentum secular bull. The p/e valuations achieved at the 3 triangle low points of between 5.5 and 8.8 are all extreme secular bear low valuations that suggest sufficient secular wash out to enable a secular bull. Once again, this casts doubt on any deep cyclical bear ahead, but more likely shallow. At current p/e of 11.8, the index is at the cheap end of what has been largely an oscillation over the years between 10 and 25. I have opened a single long position in the STI Index today, and will add to it on any significant falls.
Some pics below. Family Hampson in central Singapore. The amazing engineering of the Marina Bay Sands building. And an experience I hadn’t imagined for the kids – swimming with a monkey at the Shangri La Rasa Sentosa – thanks to the monkey for that freebie!