Singapore Also Not Immune to Global Economic Turmoil

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 |  Includes: DBSDY, EWS, UOVEY
by: David Hunkar

The tiny city state of Singapore is not immune to the global economic turmoil. Up until last year, Singapore had strong growth and was even hailed as the “Switzerland of Asia” due to many international financial institutions having offices there. The government of Singapore rode to boom and even granted licenses to develop huge casino/entertainment centers to attract tourist dollars from the fast growing Asian countries such as China, India, etc. One of the casino operators invited to build casinos near the city center was the Las Vegas Sands Corp. (NYSE:LVS) owned by Casino Mogul Sheldon G. Adelson.

However in the past few months, Singapore’s economy has been hit hard just like other Asian economies. Real estate business has slowed and many foreign workers have been laid off. Being a small country this actually reduces the population of the country as the workers leave for their homeland.

On Wednesday the Singapore government’s Ministry of Trade and Industry [MTI]“revised GDP growth forecast downwards to -5.0 to -2.0 per cent, lower than previous estimates of -2.0 to +1.0 per cent. “

They also stated that:

The weaker economic outlook is due to faster and steeper decline in the global economic activity, as well as spill over effects on key sectors of the economy from the last quarter of 2008.

Singapore does not produce many goods on its own. Its economy is heavily dependent on foreign trade as the Singapore port is a major hub for shipments from Asia to Europe, North America.As the global trade slows ports like HongKong, Singapore are impacted heavily. Hence investors can avoid Singapore now. Since not many Singapore stocks are listed in the US, the iShares MSCI Singapore Index (NYSEARCA:EWS) was the preferred option to own Singapore companies. Currently EWS has assets of $730M and the dividend yield is 7.26%.

It is also important to monitor to performance of the two OTC-listed Singapore banks: DBS Holdings (OTCPK:DBSDY) and United Overseas Bank (OTCPK:UOVEY).

DBS Holdings Update:

[Wednesday] (Jan 21) DBS its “S$4 bln rights issue was oversubscribed

"Singapore’s DBS Group,Southeast Asia’s biggest bank, said on Wednesday a S$4 billion ($2.7 billion) rights issue to boost its capital had been oversubscribed.

“Acceptances and excess applications have been received for more than the total number of rights shares offered,” the bank said in a statement.

In December, DBS said it would offer shareholders one new share for every two existing shares at S$5.42 apiece, which was then a discount of about 45 percent. DBS shares were 57 percent above the rights issue price at the close of trading on Wednesday.”

Source: Reuters

The successful rights offering shows investor confidence in DBS Holdings.