Singapore ETF: Second-Half Rebound or Stuck in the Mud?

July 3rd at 9:00am by Tom Lydon

The iShares MSCI Singapore ETF (NYSEArca: EWS) was a solid, though not spectacular performer through the first four-and-a-half months of this year. EWS, which has over $1.2 billion in assets under management, benefited as investors sought a conservative avenue for exposure to Southeast Asia’s growth story. However, EWS did not prove durable during the May/June swoon that plagued so many international ETFs.

EWS closed at $12.68 Tuesday, $2 removed from its May peak and the ETF is now sitting on year-to-date loss of almost nine performance. That dismal run indicates investors have been unimpressed by Singapore’s AAA credit rating, the country’s low unemployment, budget surplus and high per-capita GDP. [Singapore ETF Rallies]

Perhaps more worrisome is that the city-state’s economy grew just 0.2% in the first quarter and economists have slashed their 2013 growth estimates. “In a quarterly survey conducted by the Monetary Authority of Singapore (MAS), private sector forecasters expect a 1.5 per cent growth for the Singapore economy in the second quarter of 2013 — a downgrade from an earlier estimate of 2.0 per cent growth,” according to Channel News Asia.

The government is forecasting full-year growth of 1% to 3% while the consensus estimate from private economists was pared in June to growth of 2.3% from a March forecast of 2.8%. The outlook for 2014 is far more encouraging with growth expected to hit 3.8% and that could mean patient investors may want to consider EWS.

There is a good news story with EWS. Stocks in Singapore are cheap and that has at least one noted bank advocating a bullish stance. Singapore’s Straits Times Index has a P/E ratio of just 11.7 and Goldman Sachs sees upside of 19% through next March, according to CNBC. Goldman has an overweight view on Singapore, but is underweight other Asia-Pacific markets such as Australia, Hong Kong, Malaysia, Philippines and Taiwan. Like Singapore, Australia and Hong Kong each have AAA sovereign credit ratings.

EWS offers a couple of other highlights for the conservative investors shopping for global exposure. The ETF has a beta of just 0.39 and a trailing 12-month dividend yield of almost 4%, according to iShares data.  [Single Country ETFs That Offer Good Yields]

iShares MSCI Singapore ETF

ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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