Investing in Singapore: A Comprehensive Guide

Singapore’s economy demonstrated resilience with a 2.9% GDP growth in Q2 2024. The country is highly favored by investors due to its economic stability, robust real estate market, attractive dividend yields, and significant infrastructure investments.

Singapore’s economy has been resilient in the face of global geopolitical and economic uncertainties.

Reflecting this strength, Singapore’s GDP grew by 2.9% year-on-year in the second quarter of 2024, extending the 3.0% growth in the previous quarter.

The Straits Times Index (STI), Singapore’s benchmark stock index, reached a six-year high of 3,460 points on 10 July 2024.

As a leading trade and financial hub, Singapore has ascended to be the world’s most competitive economy globally in 2024, according to the latest IMD World Competitive Ranking.

Why Invest in Singapore?

Singapore has long been a favoured destination for investors seeking economic and political stability.

However, beyond its reputation as a safe haven, the nation is underpinned by several long-term structural strengths.

These include prudent fiscal management, a strong and stable currency, significant investments in world-class infrastructure, and its established position as a premier financial hub in Asia.

#1 – Steady Economic Growth and Stable Currency

Singapore’s economic growth is projected to continue at a steady pace, with an expected growth rate of 2% to 3% in 2024.

This stability is supported by the country’s decisive economic policies and strong fiscal position bolstered by its reserves, which allow it to weather global economic challenges effectively.

The strength of Singapore’s financial reserves was particularly evident during the COVID-19 pandemic when the government implemented substantial relief measures, drawing about S$40 billion on its past reserves from 2020 to 2022.

These measures helped mitigate the impact of the global economic slowdown during that period, showcasing Singapore’s ability to support its economy even in severe downturns.

In addition to its economic resilience, Singapore’s currency remains stable relative to other regional currencies, thanks to its unique exchange-rate-based monetary policy and a consistent current account surplus.

This stability is a key factor that makes Singapore an attractive destination for international investors.

#2 – Attractive and Stable Real Estate Market

The real estate market in Singapore has always been sought after by domestic and foreign buyers, contributing to its remarkable resilience and growth potential, even amidst global economic challenges.

Real estate investment activity in Singapore surged in the second quarter of 2024, with total investment sales rising by 63.3% year-on-year to S$6.4 billion, according to Knight Frank Singapore.

Beyond private real estate investment, Singapore offers a highly accessible avenue for investors through its exchange-listed Real Estate Investment Trusts (REITs).

Investing in Singapore REITs, or S-REITs, provides several distinct advantages including portfolio diversification across multiple properties, regular income distribution, and tax benefits.

REITs invest in a diversified portfolio of income-generating real estate assets, such as shopping malls, offices, and hotels. These assets are professionally managed, and 90% of the revenues—primarily rental income—are distributed to investors at regular intervals and are tax-exempted.

As of Q2 2024, the average distribution yield of S-REITs stood at 8.1%, making them a reliable source of passive income.

Singapore’s REIT market is one of the largest in Asia, with 41 REITs and property trusts listed on the Singapore Exchange (SGX), boasting a total market capitalisation of S$87 billion as of Q2 2024.

Over 90% of these S-REITs hold assets both locally and overseas, offering investors exposure to a diverse range of markets.

The FTSE ST REIT Index, which tracks the performance of S-REITs, has delivered a 10-year total return of 44.7%, with a compound annual growth rate (CAGR) of 6% in market capitalisation over the same period.

This strong performance underscores the potential for capital appreciation alongside regular income distributions.

Moreover, investing in S-REITs is as straightforward as buying and selling stocks, with ample liquidity on the SGX. This ease of access, combined with strong performance and reliable income distribution, positions Singapore as a premier destination for real estate investment.

#3 – Attractive Dividend Yield

Historically, the STI has provided one of the highest average dividend yields over the past decade, making it a favourable choice for investors looking to build a reliable stream of passive income.

Across a 10-year period, the STI averaged a 3.94% dividend yield, which is higher than many other global market indices as of 7 August 2024. (Source: Bloomberg, August 2024).

The current dividend yield of the STI is 4.8% as of 7 August 2024. (Source: Bloomberg)

#4 – Economic and Corporate Restructuring

With an acceleration in structural shifts in the global economy post the COVID-19 pandemic, there have been significant efforts to transform the economy to tap into emerging opportunities.

The Emerging Stronger Taskforce (EST) has proposed to transform Singapore into a Global-Asia node of technology, innovation and enterprise by taking the country’s Smart Nation aspirations global, seizing growth opportunities from sustainability, as well as growing a pool of innovative and international Large Local Enterprises (LLEs)

Correspondingly, many companies have laid out their restructuring plans with an objective of improving shareholder returns.

For example, Sembcorp Industries is accelerating on its renewables growth and is on track to achieve its target of 10 GW gross installed renewables capacity by 2025. As a leading renewables player in Asia, the company is now aiming to grow its gross installed renewables capacity to 25 GW by 2028.

Likewise, Asia’s leading communications technology group Singtel has successfully completed its strategic reset to transform the company amid accelerated digitisation brought on by COVID by identifying and scaling new growth engines in both the ICT and data centre space. Following the completion of its strategic reset, the company has now its eyes set on growth and sustained value realisation through lifting its business performance and smart capital management.

#5 – Infrastructure Investments to Position for the Long Term

Singapore continues to make substantial investments in infrastructure projects, reinforcing its status as a global logistics and business hub.

Key projects include Changi Airport Terminal 5, which will enhance Singapore’s connectivity as an international aviation hub, and the Tuas Megaport, set to be one of the world’s largest container terminals.

Additionally, the Punggol Digital District is being developed to foster innovation in the tech sector, further cementing Singapore’s role in the global digital economy.

Singapore is also at the forefront of growth industries such as electric vehicles (EVs) and advanced manufacturing. The Economic Development Board (EDB) has been instrumental in attracting significant investments in these sectors.

Within Asia, Singapore stands out as the most attractive destination for foreign investment on the Milken Institute’s Global Opportunity Index.

The country’s appeal is driven by its robust business environment, characterised by ease of doing business and transparent regulatory framework. Singapore also excels in safeguarding investor rights, providing a secure institutional framework that ensures the safety of foreign assets.

These strengths have made Singapore a top global destination for foreign direct investment (FDI).

In 2022, FDI inflows reached a record high of US$141.2 billion (S$189 billion), positioning the country as the third-largest FDI recipient worldwide behind the US and China, and accounting for nearly two-thirds of FDI flows into ASEAN countries.

Notably, Dyson has chosen Singapore as the location for its global headquarters and its first proprietary new technology battery plant.

This state-of-the-art facility, situated in Tuas, is the most significant investment in advanced manufacturing in Dyson’s history, covering an area equivalent to 53 basketball courts.

The plant is expected to be fully operational by 2025 and will produce innovative, energy-dense batteries for Dyson’s latest products.

Similarly, Hyundai has established the Hyundai Motor Group Innovation Centre Singapore (HMGICS) within the Jurong Innovation District.

The facility focuses on researching new manufacturing techniques and building a range of electric vehicles, including the Ioniq 5 and Ioniq 6 models with a production capacity of up to 30,000 cars annually.

These strategic investments in infrastructure and cutting-edge industries underscore Singapore’s commitment to long-term economic growth, positioning the country as a leader in both traditional and emerging sectors on the global stage.

#6 – Exposure to International Markets

Singapore’s position as a regional and global hub provides investors with access to markets across the globe.

In fact, it is estimated that companies that hail from beyond Singapore’s shores represent about 31% of the S$815 billion in total market value of companies listed on the Singapore Exchange, based on SGX data as of July 2024.

There are companies listed on the Singapore Exchange (SGX) that have significant operations outside Singapore, offering investors exposure to these dynamic economies.

Listed on the SGX, Thai Beverage (SGX: Y92), producer of Chang Beer, generates a large portion of its revenue in Thailand and NIO (SGX: NIO), an electric vehicle company, which has a global presence, is also listed on the SGX.

Singapore Depository Receipts (SDR) have also been launched on the Singapore Exchange with the objective of allowing investors in the Singapore stock market easy access to stocks that are listed in overseas exchanges.

The first SDRs to be listed on the SGX will be Thai SDRs, offering investors an opportunity to invest in Thailand’s blue chip companies, including CP All (SGX: TCPD), Airports of Thailand (SGX: TATD), PTTEP (SGX: TPED), Kasikorn Bank (SGX: TKKD), Advanced Info Service (SGX: TADD), Delta Electronics (SGX: TDED), Gulf Energy (SGX: TGED) and Siam Cement (SGX: TSCD).

What Are Some Risks to Look Out For?

While investing in Singapore offers many advantages, there are risks to consider.

Due to Singapore’s open economy, the performance of stocks in the Singapore market is closely tied to the health of both the Singaporean and global economies.

A sharp economic downturn, such as the one experienced during the COVID-19 pandemic, may lead to a significant decline in share prices.

How Can Investors Gain Exposure to Singapore?

Investors looking to tap into Singapore’s growth potential may do so through brokers that offer access to the SGX or by investing in exchange-traded funds (ETFs) that track the STI’s performance, such as the STI ETF (ES3) and Nikko AM STI ETF (G3B).

The Lion-Phillip S-REIT ETF (CLR) and CSOP iEdge SREIT ETF (SRT) are pure-play ETFs that allow investors to gain exposure to a diversified portfolio of S-REITs in a simple way.

Furthermore, several companies listed on other ASEAN exchanges have exposure to Singapore, offering additional opportunities for regional diversification.

For instance, Gamuda Bhd (5398.KL), listed on the Malaysian stock exchange, was awarded a civil contract of around S$510 million by the Land Transport Authority (LTA) of Singapore to design and construct of the MRT stations and tunnels. Some regional banks also have a presence in Singapore. For example, CIMB (1023.KL) generated 10% of its profit before tax (PBT) from the Singapore market in 2023.

Investors can also access blue-chip companies like Singapore Airlines and Singtel through Singapore Depository Receipts (SDRs) listed on the Stock Exchange of Thailand, providing another avenue to gain exposure to the Singaporean market.

Where Can You Find More Resources on the Singapore Stock Market?

Conducting thorough research is crucial to capturing growth opportunities and mitigating risks when investing in the Singapore stock market.

The Singapore Exchange (SGX) website offers a wealth of resources, including the latest company announcements, products, services, and key trading statistics.

Singapore Stock Market at a Glance

As of July 2024, Singapore’s stock market capitalisation is at S$ 815 billion with a total of 622 listed securities.

The largest sectors would be financials with a market capitalisation of $465 billion, consumer services (S$72.2 billion), consumer goods (S$72.1 billion), and industrials (S$71.2 billion).

Singapore has 41 REITs & Property Trusts with a combined market capitalisation of S$87 billion, representing about 13% of Singapore’s overall listed stocks as of June 2024.

There are also 46 ETFs and Leveraged and Inverse (L&I) products listed on the SGX with a combined asset under management of S$11 billion as of June 2024.

Source : Why Invest in Singapore?