ETF Investing: A Compelling Case for Singapore

SingaporeBy Joshua Schroeder
As the US and Europe continue to struggle with their financial problems I decided to dedicate some time to other regions of the world that may offer relatively safe investments, but also compelling risk reward opportunities.  As a potential addition to my “core” holdings, any possible investment in a region or country would require it to have a stable government, strong GDP growth, sound fiscal policy, and a number of companies or sectors that I believe will continue to power the region forward over the mid to long term.

In my opinion, Singapore certainly has a strong case.  While it is a small country with literally no natural resources, and emerging markets have been volatile of late, it is located in the center of rapidly growing Asia and has developed an economy with excellent companies in the areas of electronics, IT, financial services, pharmaceuticals, and chemicals.  It´s economy grew over 15% last year and according to John Wasik of Reuters, the country is working to establish itself as Southeast Asia´s hub for trading and technology.  Further to this point, Singapore has benefitted immensely from having a strategic port in one of the busiest trade areas of the world.  With high per capita GDP, a skilled workforce, excellent business transparency, and large rapidly growing countries nearby, the future appears to be bright.

So, if everything is on the up and up in Singapore why is the iShares MSCI Singapore Index Fund (EWS), the ETF that seeks to track the Singaporean equity market, down over 20% from its high in 2011?  Well, even “Singapore is not immune to the Eurozone debt crisis and the economy will be feeling the pressure of the latest warning from Standard and Poor’s” claims Tom Lydon of ETF Trends.  Add to that the possibility of a hard landing in China and one can see why it has sold off.  However, Eugene Szeto of HSBC Holdings pointed out on Bloomberg recently that as the growth in the developed world, such as Europe and the U.S., slows, Singapore does have an edge as a source of funding for energy traders and commodity suppliers such as grains, sugar and edible oils.  This could benefit the EWS etf as nearly 50% of the fund is comprised of financial services companies.

As of close of trading on the 12th of January the MSCI Singapore Index Fund was trading at $11.40 with a NAV of $11.32 and a 12 month yield of 4.3%.  Below are daily and weekly technical charts showing support and resistance levels to keep an eye on for the index fund.  Have a great weekend.

 Charts prepared by Andrew Nyquist and Joshua Schroeder.


Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of his employer or any other person or entity.

No positions in any of the securities mentioned at time of publication.

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