Why should we buy Singapore?

 

2 October 2016

 

Dear Fellow Investor,

Why should we buy Singapore ?

CAPE RATIO

• The cyclically adjusted price-earnings ratio (CAPE) says Singapore is one of the cheapest markets in the world 
• The price-to-book ratio (P/B) is at a level that has historically been followed by huge market gains 
• The market’s dividend yield is one of the highest it’s ever been 

 

What is CAPE ?

CAPE is cyclical adjusted price earnings ratio which is a long term valuation model  adjusted to a 10 year business cycle.  

 Singapore is one of the cheapest markets in the world with a CAPE ratio of 11.5. For developed markets, only Spain, Portugal, Norway and Italy look cheaper. It’s also cheaper than Korea (12.7), Hong Kong (14.3) and Taiwan (18.2). Singapore’s shares are only slightly higher than China’s, which trades at a CAPE of 11.3. The 

CAPE is a long-term valuation measure. It doesn’t suggest that shares are going to bounce sharply in coming weeks. But a low CAPE represents good value if you have a long-term perspective, and markets with low CAPEs tend to outperform over time.

Price to book ratio

Price to book ratio is at a crises low . Notice the blue circles on the chart. The 1988, 1998, 2008 crises are circled.  Are things that
bad now ? Is Singapore going to sink into the sea ?

 

Dividend Yields

Dividend yields in Singapore are the 2^nd highest in Asia just after Australia.  
  Singapore are the 2^nd highest in Asia just after Australia.   

 

Summary

The CAPE ratio shows Singapore to be one of the cheapest markets In the world.  The P/B ratio suggests Singapore shares offer an unprecedented  undervalued opportunity while generous dividend yields offer income as well as protection during market volatility.

PEs averaging 12.3 also show an undervalued, unappreciated market.   Risks are high levels of debt and the economy at a standstill but history suggests now is a good risk/ reward opportunity.  

 

Singaporeans are resilient, hard working, thrifty, educated and business minded . My bet is recovery.

Phillip offers PGWA cash accounts that allow us to invest and manage  Singapore and Asian equity investments.  Please contact me if interested.

Invest well and grow your wealth

Bill