Yoshikami: Singapore; An Investment Idea with Legs
Founder and Chairman of the DWM Investment Committee at Destination Wealth Management.
I'm in Singapore on an Asian research trip and I continue to be impressed with the trajectory of this region in terms of its growing influence on global economics.
In particular, Singapore stands out as a country moving towards increased prominence as a financial center. Perhaps as an indication of the growing influence, CNBC Asiathis week re-launched its new Asia Pacific studio in the Singapore Stock Exchange.
While Europe struggles with a mounting debt crisis and the US tepidly recovers from its worst downturn since the 1930s, Singapore and the surrounding region continue to march forward. The region has emerged from the financial crisis with stronger government and corporate balance sheet, and the economies also showing much better macro data in terms of earnings numbers. The reasons for growth are many for this region, and perhaps it's illustrative to examine why Singapore in particular has a promising future.
A recent Bank of America/Merrill Lynch report reminds us that since the 1997 Asian financial crisis, Singapore is the only Asian country that has enjoyed a sustained and broad-based investment upturn outside of China and India.
Singapore is also the only Asian country that has gained global market share in services, outside of China and India. GDP growth forecasts for Singapore for 2010 are in the 8% to 10% range.
Global services will continue to be a dominant theme and Singapore has long been considered a financial services hub for the region. It is a melting pot of cultures, and the ease in dealing with inter-country financial relationships is a model for cross-border trade. As the world economy melts together this type of business interaction will grow in importance.
As a cyclical play on a global economic recovery, Singapore provides an opportunity for investors to participate in this theme. The country has been successful in climbing higher up the manufacturing value chain. It industrial production achieved record-high growth in April this year at 51.0% Year-on-Year, and continues to gather strength mainly driven by increases in the contribution from the biomedical sector, in particular, pharmaceuticals.
The city-state is a vibrant trading center used by countries across the region to distribute goods. Its shipping industry provides a hub for Asian economies to move goods around the world. One only needs to look out into the harbor to see the scores of ships waiting to fan out across the world distributing regional products. According to McKinsey estimates, by 2020, intra-Asian trade is expected to constitute at least 50 per cent of all Asian trade.
Tourism and foreign investment continues to be a key driver for the Singaporean economy and one only needs to look around to see the disparate groups of citizens and travelers. Real estate investment and tourism consumption are driven by this population flow with seemingly vast opportunities remaining as economic recovery moves forward.
It is a popular theme for investment strategists to talk about Asia as a place where future investment profits can be found. But Asia is a region with many different types of economies and varying prospects for success. As an investor, it is important to understand the individual dynamics of each country and to diversify your portfolio accordingly.
Other Asian countries have appeal as well and should be examined closely. I'm in Asia looking for those opportunities, but it is our view that one of the more opportunistic investment strategies present today is to invest in the Singaporean economy. It's a country with an integral connection to the global economy and with forward-looking leadership in both governmental and business sectors.
We believe the future is optimistic for Singapore.
Michael A. Yoshikami, Ph.D., CFP®, is Founder, President, and Chief Investment Strategist of YCMNET Advisors, Inc., a registered investment advisory firm (www.ycmnet.com). He oversees all investment and research activities of YCMNET. He is a respected lecturer speaking frequently on market issues, tactical asset allocation, and investment strategy. Michael and YCMNET were ranked as one of the top 100 investment advisors in the United States for 2009 by Barrons. He appears regularly on CNBC and CNBC Asia and can be reached directly at email@example.com.