Asia Markets

Asia’s worst stock market last year is now one of the region’s top performers

Key Points
  • Singapore's benchmark Straits Times Index has climbed around 12.2% so far this year to become one of Asia's top performers.
  • The STI ended 2020 as the worst performer in Asia after losing 11.8%.
  • Still, the Taiwan Stock Exchange Capitalization Weighted Stock Index or TAIEX slightly edged out the STI with a 12.4% gain this year to take the top spot in Asia.

In this article

A cyclist rides before the city skyline at Marina Bay in Singapore.
Roslan Rahman | AFP | Getty Images

SINGAPORE – Singapore's stock market is staging a strong comeback.

The benchmark Straits Times Index ended 2020 as the worst performer in Asia, losing 11.8% through the year. But the STI climbed around 12.2% so far this year, and has become one of the region's top performers.

The STI is a market capitalization weighted index that tracks the top 30 companies listed on the Singapore Exchange. As of Tuesday, as many as 12 of its constituent stocks have made double-digit gains this year.

Taiwan was Asia's best-performing stock market as of Tuesday. The benchmark Taiwan Stock Exchange Capitalization Weighted Stock Index, or Taiex, slightly edged out the Singapore index with a 12.4% gain this year.

"Singapore is in a very good sweet spot, mainly because it's very cyclical," Joanne Goh, investment strategist at Singapore bank DBS, said last week.

Markets or stocks that are "cyclical" rise and fall in conjunction with fluctuations of the economy. The STI is made up of a high proportion of financial and industrial stocks typically considered as cyclical.

Singapore stocks: 'One of the cheapest'

With the global economy recovering from the pandemic-induced recession, Singapore's stock market would do well, Goh said at a webinar outlining DBS' quarterly investment outlook.

She added that valuation in the Singapore market is "one of the cheapest" in the region, and that has spurred merger and acquisition activities among listed companies.

Earlier this month, conglomerate Jardine Matheson said it plans to simplify its structure by buying the 15% of Jardine Strategic it does not already own.

Jardine Strategic is an investment holding firm and, like Jardine Matheson, is a constituent stock of the STI. If the acquisition goes through, Jardine Strategic will be delisted.

Singapore's banks have performed far better than expected, says UBS
Singapore's banks have performed far better than expected, says UBS

Just last week, property group CapitaLand announced plans to split the company into two. A revamped real estate investment management company will become a new listed entity on the Singapore Exchange, while the property development business will be taken private.

"We should be seeing some of these M&A (mergers and acquisitions) activities driving Singapore market, and at the same time, we have earnings recovery," said Goh. She also said banks, which make up roughly one-third of the benchmark index, will benefit from rising yields in the U.S.

"We should see more upside for the Singapore market," she said.

Taiwan markets: 'High proportion of growth stocks'

Unlike Singapore, Taiwan's stock market has a "high proportion of growth stocks," French investment bank Natixis said in a report earlier this month.

Growth stocks are those with the potential to grow quickly, and they're often in the tech sector. Such stocks were in favor last year when the Covid-19 pandemic hit global economic activity, but many investors are now buying cyclical stocks as the economy recovers.  

Still, the performance of the Taiwanese market showed that "downward pressure from high proportion of growth stocks can be partially buffered by high dividend yield, and even better if there is resilient economic growth," said Natixis.

Taiwan was Asia's best-performing economy in 2020, with its exports boosted by strong global semiconductor demand. The island is home to Taiwan Semiconductor Manufacturing Co, or TSMC, the world's largest foundry.