The Investment Climate in Singapore

BusinessThe Investment Climate in Singapore

The Investment Climate in Singapore

Singapore’s economy has grown 2.7% on an annual basis in the first quarter of the year, surpassing the government’s own expectations for a 2.5% growth.
The strong performance has come on the back of solid export activity, particularly in the semiconductor sector, as well as healthy contributions from transportation, storage and business services.
Despite the good numbers, though, projections for growth for the rest of the year remain more subdued, in line with a highly uncertain global economic and geopolitical outlook.
The country’s Ministry of Trade and Industry currently expects economic growth for the whole of 2017 to come in at just above 2 per cent.

Singaporeans remain conservative

The future of Singapore
The economic figures and outlook were released a week after a survey claimed that Singaporean investors remain among the most conservative in the world.
The Global Investment Survey 2017, by Legg Mason Global Asset Management, shows that close to two thirds of Singaporeans feel that their investment decisions are still “somewhat” or “strongly” affected by the global financial crisis that took place ten years ago.
“The island nation is highly integrated with the global economy, so the local economy and capital markets were strongly impacted, hitting many households directly in the wallet,” says Mr Lennie Lim, Regional Head for Asia for Legg Mason.
Singaporean’s defensive stance on the local market is also evident by taking a look at the average composition of their investment portfolios. More than half of their total allocation is either in cash or fixed income.

A different view

The preference for fixed income assets, though, also has to be seen in the light of strong demand in the asset class in Asia as a whole. Data from ANZ Research shows that global investors poured $9 billion into Asian bonds, both government as well as corporate issues, in May, the highest amount since September 2016.
Daniel Morris, senior investment strategist at BNP Paribas in London, attributes this partly to low inflation expectation in the US, which makes Asian bonds more preferable compared to US issues, for global investors. In light of this, “Asian fixed-income starts to look a lot more attractive,” he said.
Khoon Goh, head of Asia research for ANZ, also believes that the increased demand is a sign of faith in the area, as opposed to risk aversion, pointing to positive inflows in Asian equities as well. “If you see very strong inflows in debt and less so in equities, then it’s fair to make the statement that it’s risk aversion. But the fact that you’re seeing strong inflows into both means this is not the case”, Goh said.

In search of higher returns

Start investing in Singapore
It all comes as the current global investment environment remains extremely challenging and characterised by low returns. This fact has actually prompted a push in the opposite direction to the defensive investment nature of most Singaporeans.
For a good example of this, look no further than Singapore-based iGlobe Partners, a venture capital firm which invests in potentially groundbreaking ideas and innovations.
With a minimum investing amount typically around $1 million and a lock-in period of about eight to ten year, investing in a Venture Capital (VC) fund is obviously not for the faint-hearted and certainly not for the average investor.
Clearly, committing this kind of money for this long a period, requires extremely thorough due diligence. Typically, an investor would need to carefully consider the firm’s management team, in order to have faith in its integrity and expertise on its chosen investment domain.
The potential returns, though, of the order of 20 to 25 percent on an annual basis, are high enough to maybe justify the risk for those investors who can afford them.
Furthermore, the high returns is not the sole reason for investing in a VC fund, according to iGlobe Partners’ managing partner Koh Soo Boon. “Other than the investment return, our investors have the immense satisfaction of walking the growth journey with the entrepreneurs, and watching them fulfil their dreams”, he says.
So, all in all, from the most conservative to the most aggressive investment behaviour, Singapore seems to have something for everyone on the risk-return spectrum these days. As always, only time will tell which end of that spectrum will get rewarded in this case.

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