Business & Finance
Business and Finance
Business and Finance
Thu, September 3, 2009
Wed, September 2, 2009 Singapore Fund: The Singapore Fund Announces Third Quarter Earnings
JERSEY CITY, NJ--(Marketwire - September 2, 2009) - The Singapore Fund, Inc. (
For the quarter ended July 31, 2009, the Fund earned net investment income of approximately U.S. $98,000 (equivalent to income of U.S. $0.01 per share) resulting in net investment income for the nine-month period of approximately U.S. $1,357,000 (equivalent to income of U.S. $0.14 per share). In addition, net realized and unrealized gains from investment activities and foreign currency transactions during that same three-month period were approximately U.S. $39,272,000 (equivalent to a gain of U.S. $4.15 per share). As a result, the net realized and unrealized gains increased to approximately U.S. $43,981,000 (equivalent to a gain of U.S. $4.64 per share) for the nine months ended July 31, 2009.
In comparison, during the quarter ended July 31, 2008, the Fund earned net investment income of approximately U.S. $891,000 (equivalent to income of U.S. $0.10 per share) resulting in net investment income for the nine-month period of approximately U.S. $1,735,000 (equivalent to income of U.S. $0.19 per share). In addition, net realized and unrealized losses from investment activities and foreign currency transactions during that same three-month period were approximately U.S. $16,713,000 (equivalent to a loss of U.S. $1.81 per share). As a result, the net realized and unrealized loss increased to approximately U.S. $73,550,000 (equivalent to a loss of U.S. $6.14 per share) for the nine months ended July 31, 2008.
On July 31, 2009, total net assets of the Fund were approximately U.S. $124.4 million. The net asset value ("NAV") per share on that date was U.S. $13.13, based on 9,477,893 shares outstanding. Assuming the reinvestment of the U.S. $0.50 per share dividend paid on December 30, 2008, the Fund generated an investment return of 58.17% for the nine months ended July 31, 2009, when measured against the NAV per share of U.S. $8.85 on October 31, 2008, based on 9,363,114 shares outstanding at that time. For the nine months ended July 31, 2009, the Fund's benchmark, the Straits Times Index ("STI"), increased by 52.49% in U.S. dollar terms.
In comparison with the same quarter-end of the previous fiscal year, total net assets on July 31, 2008 were approximately U.S. $144.4 million, equivalent to a NAV of U.S. $15.42 per share, based on 9,363,114 shares outstanding.
As of July 31, 2009, the Fund had 89.38% of its net assets invested in Singapore equity securities, 4.21% invested in Malaysian equity securities, 2.78% invested in Indonesian equity securities and 1.89% invested in Thai equity securities. The balance of the Fund's net assets were in the form of time deposits and other cash equivalents denominated in Singapore Dollars ("SGD") (0.31%), U.S. Dollars (0.25%) and other assets less liabilities of 1.18%.
As of September 1, 2009, the Fund's NAV per share was U.S. $13.08, based on net assets of approximately U.S. $124.0 million. On the same date, the Fund's shares on the New York Stock Exchange closed at U.S. $11.60, representing a trading discount to NAV per share of 11.31%.
Singapore Market Review
The Singapore stock market surged 42.8% in US$ terms during the three months ended July 31, 2009. The Fund did better than its benchmark return with a 46.3% increase in its NAV. The Singapore market rallied on the back of a strong residential property market and better than expected economic numbers. As a result, corporate earnings forecasts have been revised upwards since the beginning of 2Q09. The corporate reporting season, starting with the U.S. market, generally signaled a positive set of numbers. This further set the tone for additional earning upgrades. In Singapore, banks kicked off the reporting season with better-than-expected 1Q09 results, driven by better trading income, steady margins and good cost control.
After contracting 12.2% QOQ in 1Q09, the Singapore economy staged a sharp turnaround by expanding 20.7% in 2Q09 owing to global inventory restocking and aggressive policy stimulus. The manufacturing sector showed signs of stability with positive monthly expansion in 2Q09, reversing the series of monthly contraction witnessed since the beginning of 4Q08. However, the services sector remained weak, shrinking 5.1% YOY, similar to the rate seen in 1Q09. While the wholesale, retail trade and financial services sector saw smaller contractions, the hotels and restaurants sector was weighed down by a slump in tourist arrivals.
Domestic investor sentiment was led by a spike in residential property transactions. In the first seven months of the year, 10,017 new units of residential properties were sold. This looked set to breach the historical annual high of 14,811 units in 2007. As a result of stronger-than-expected new launches, developers have started to replenish their land bank, underpinning the sustainability of the real estate market.
Outlook and Strategy
A combination of easy monetary conditions, benign unemployment and higher affordability has driven the property market higher. As the take-up rates of new launches reaches the annual run-rate of peak year in 2007, stock market sentiment is expected to remain buoyant. We expect volumes for the rest of the year to remain strong, although we are more cautious about further upside in pricing owing to potential policy risks.
Singapore is likely to see one of the sharpest upswings in prospects amongst its Asian peers given its small, externally-led economy. The upturn in the global economy should also provide a well-timed window for the launch of the integrated resorts in Singapore in 1Q10. We expect corporate earnings forecasts to see further upgrades after the 2Q09 reporting season, the bulk of which will have been announced by August. Recent upward earnings revisions in the banks bear testimony to this. Stock market valuations could rise above historical averages. At 15.1 times 2010 earnings and 16.6% earnings growth, the Singapore market is now slightly more expensive than the five-year historical average. However, it is typical for markets to trade above historical valuations during early cyclical recoveries and at times of easy monetary conditions. We expect the Singapore market to trend above historical valuations in the current phase of economic recovery.
With economic activities continuing to improve and more earnings upgrades expected to be in the pipeline, the Singapore stock market is likely to be firmly supported. The Fund will maintain its overweight position in the cyclical sector at the macro level, while focusing on companies with earnings surprises from a bottom-up perspective. Investors are likely to pay a premium for companies able to deliver earnings surprises. We are overweight in the offshore marine and real estate sectors, as well as cyclical companies whose share prices are market laggards, such as Singapore Press Holdings.
Benchmark Portfolio (%) (%) Comments ---------- ---------- ------------------------- Sector limit of 25% is applicable, and the Fund is prohibited from owning DBS Group (benchmark Financial Institutions 32.2 24.1 weight = 10.7%). ---------- ---------- ------------------------- Telecommunications 13.2 13.1 Neutral view. ---------- ---------- ------------------------- Underweight due to negative view on specific stocks such as Sembcorp Industries (prefer Sembcorp Marine), Fraser & Neave (prefer purer property developer) and Conglomerates 17.6 14.1 Noble (prefer Olam). ---------- ---------- ------------------------- Negative view on aviation and container shipping. Domestic transportation likely to underperform given positive market Transportation 6.4 0.0 outlook. ---------- ---------- ------------------------- Easy monetary conditions favor property asset Property Development 14.5 19.5 class. ---------- ---------- ------------------------- Anticipate 2H09 to see strong order flows into Offshore Marine 1.7 8.2 shipyards. ---------- ---------- ------------------------- Stock specific preference in Venture Corp. (contract manufacturer in electronic products) and IJM (Malaysian Industrial 2.0 6.4 contractor). ---------- ---------- ------------------------- Underweights are in consumer discretionary (Genting and Jardine Consumer 9.8 8.8 C&C). ---------- ---------- ------------------------- Communications - Media 2.6 4.4 Laggard cyclical stock. ---------- ---------- ------------------------- Our stocks in this sector have resilient earnings but trade at the low range of multi-year Technology 0.0 4.8 valuation. ---------- ---------- ------------------------- Improving credit market Real Estate Investment alleviates refinancing Trust 1.9 2.7 risks. ---------- ---------- -------------------------
The ten largest industry classifications of the Fund's equity investments held at July 31, 2009 were:
Percentage of Industry Net Assets ---------- 1. Property Development 19.06% 2. Banks 19.04 3. Telecommunications 12.88 4. Shipyards 7.64 5. Electrical Products & Computers 5.70 6. Food, Beverage, Tobacco 5.07 7. Conglomerate 4.67 8. Diversified Financial 4.66 9. Health & Personal Care 4.35 10. Communications-Media 4.33
The ten largest individual common stock holdings at the same date were:
Percentage of Issue Net Assets ---------- 1. Singapore Telecommunications Ltd. 12.88% 2. United Overseas Bank Ltd. 10.16 3. Oversea-Chinese Banking Corp. Ltd. 8.88 4. Hongkong Land Holdings Ltd. 5.08 5. Keppel Corp. Ltd. 4.68 6. Jardine Matheson Holdings Ltd. 4.67 7. Singapore Exchange Ltd. 4.66 8. Wilmar International Ltd. 4.35 9. Singapore Press Holdings Ltd. 4.33 10. Venture Corp. Ltd. 4.08 QUARTERLY RESULTS OF OPERATIONS Net Realized and Unrealized Gains (Losses) Net Increase on Investment (Decrease) in Net and Foreign Net Assets For the Quarter Investment Currency Resulting From Ended Income (Loss) Transactions Operations Total Per Total Per Total Per (000's) Share (000's) Share (000's) Share ------ ------- --------- ------- --------- ------- January 31, 2009 $ 385 $ 0.04 $ (4,258) $ (0.45) $ (3,873) $ (0.41) April 30, 2009 874 0.09 8,967 0.94 9,841 1.03 July 31, 2009 98 0.01 39,272 4.15 39,370 4.16 ------ ------- --------- ------- --------- ------- For the Nine Months Ended July 31, 2009 $1,357 $ 0.14 $ 43,981 $ 4.64 $ 45,338 $ 4.78 ====== ======= ========= ======= ========= ======= January 31, 2008 $ (5)$ 0.00 $ (48,499) $ (5.22) $ (48,504) $ (5.22) April 30, 2008 849 0.09 8,338 0.89 9,187 0.98 July 31, 2008 891 0.10 (16,713) (1.81) (15,822) (1.71) October 31, 2008 774 0.08 (62,263) (6.63) (61,489) (6.55) ------ ------- --------- ------- --------- ------- For the Year Ended October 31, 2008 $2,509 $ 0.27 $(119,137) $(12.77) $(116,628) $(12.50) ====== ======= ========= ======= ========= ======= PER SHARE SELECTED QUARTERLY FINANCIAL DATA For the Quarter Ended Net Asset Value Market Price* Share Volume* High Low High Low (000) ------- ------- ------- ------- -------- January 31, 2009 $ 9.26 $ 7.71 $ 8.84 $ 6.11 1,111 April 30, 2009 8.97 6.78 7.91 5.68 919 July 31, 2009 13.13 8.97 11.65 7.92 717 January 31, 2008 $ 22.92 $ 15.66 $ 20.49 $ 14.03 1,546 April 30, 2008 17.32 14.95 15.98 12.90 1,024 July 31, 2008 17.64 15.31 15.50 13.21 1,083 October 31, 2008 15.37 7.94 13.80 7.01 1,396 *As reported on the New York Stock Exchange.
