The Singapore Fund, Inc. (NYSE: SGF), a closed-end management investment
company seeking long-term capital appreciation through investment
primarily in Singapore equity securities, today announced its performance
results for the three months ended April 30, 2010, the second quarter of
its 2010 fiscal year.
For the quarter ended April 30, 2010, the Fund earned net investment
income of approximately U.S. $562,000 (equivalent to income of U.S. $0.06
per share) resulting in net investment income for the six-month period of
approximately U.S. $569,000 (equivalent to income of U.S. $0.06 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. $14,298,000 (equivalent to a gain of U.S.
$1.51 per share). As a result, the net realized and unrealized gains were
approximately U.S. $17,366,000 (equivalent to a gain of U.S. $1.83 per
share) for the six months ended April 30, 2010.
In comparison, during the quarter ended April 30, 2009, the Fund earned
net investment income of approximately U.S. $874,000 (equivalent to
income of U.S. $0.09 per share) resulting in net investment income for
the six-month period of approximately U.S. $1,259,000 (equivalent to
income of U.S. $0.13 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. $8,967,000
(equivalent to a gain of U.S. $0.94 per share). As a result, the net
realized and unrealized gains were approximately U.S. $4,709,000
(equivalent to a gain of U.S. $0.49 per share) for the six months ended
April 30, 2009.
On April 30, 2010, total net assets of the Fund were approximately U.S.
$146.9 million. The net asset value ("NAV") per share on that date was
U.S. $15.47, based on 9,493,516 shares outstanding. Assuming the
reinvestment of the U.S. $0.26 per share dividend paid on December 30,
2009, the Fund generated an investment return of 13.90% for the six
months ended April 30, 2010, when measured against the NAV per share of
U.S. $13.85 on October 31, 2009, based on 9,477,893 shares outstanding at
that time. For the six months ended April 30, 2010, the Fund's benchmark,
the Straits Times Index ("STI"), increased by 14.50% in U.S. dollar terms.
In comparison with the same quarter-end of the previous fiscal year, total
net assets on April 30, 2009 were approximately U.S. $85.1 million,
equivalent to a NAV of U.S. $8.97 per share, based on 9,477,893 shares
outstanding.
As of April 30, 2010, the Fund had 87.59% of its net assets invested in
Singapore equity securities, 3.73% invested in Thai equity securities,
2.11% invested in Malaysian equity securities and 1.98% invested in
Indonesian 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") (3.78%), U.S. Dollars ("USD") (0.07%), Malaysian
Ringgits (0.02%) and assets in excess of other liabilities 0.72%.
As of June 14, 2010, the Fund's NAV per share was U.S. $14.34, based on
net assets of approximately U.S. $136.1 million. On the same date, the
Fund's shares on the New York Stock Exchange closed at U.S. $12.60,
representing a trading discount to NAV per share of 12.13%.
Singapore Market Review
The STI finished the six month period ended April 30, 2010 on a strong
note despite volatility caused by the sovereign debt crisis in Southern
Europe and tightening fear in China. Underlying economic momentum in
Singapore and its regional neighbors remained robust, leading to
continuing upgrades in corporate earnings.
Advanced estimates of first quarter 2010 ("1Q10") real Gross Domestic
Product ("GDP") growth in Singapore was a stunning 13.1% YoY, much
stronger than consensus. The official growth forecast for 2010 was
subsequently raised to 7-9% YoY, while inflation was also revised upwards
to 2.5-3.5%. The rapid expansion in 1Q10 GDP was driven by the
manufacturing sector which grew a strong 30% YoY. The services sector
expanded 8.4% and the construction sector rose 11.3% YoY during the
quarter.
In conjunction with these numbers, the Monetary Authority of Singapore
("MAS") announced a one-off revaluation of the SGD trade-weighted trading
band, and a shift to a gradual and modest appreciation (from zero) of the
SGD trade-weighted trading band. These two moves surprised the market and
suggested a more decisive tightening move than the market expected.
During the period under review, the Singapore government introduced a
series of measures to cool down the residential property market which has
seen a strong pick up in demand and rising prices. According to the Urban
Redevelopment Authority ("URA"), as at the end of 1Q10, residential
property prices rose more than 30% since bottoming in the second quarter
of 2009 ("2Q09"). Some of the anti-speculation measures included the
imposition of a seller's stamp duty on all residential properties sold
within a year of purchase and lowering of the loan-to-value limit to 80%
for housing loans.
Within the STI indexed components, major gainers included Neptune Orient
Lines, Gold Agri, SMRT, SIA Engineering and Jardine Cycle & Carriage.
Major losers included Genting Singapore, Capitaland, CapitaMall Asia, OLAM
and Singapore Exchange.
Outlook and Strategy
Given the encouraging economic data that was announced recently, the
consensus view is now moving towards a broad-based and more sustainable
recovery. This is a positive backdrop for corporate earnings growth.
However, it also portends greater inflationary pressure as the output gap
is fast closing.
The Singapore market trades at an earnings multiple of 15.1 times
estimated 2010 earnings and has an anticipated earnings growth average of
14% earnings growth over this year and next. This is in line with the
average for the past five years. The near term market direction will be
driven by external events such as the sovereign blowouts in Europe,
Chinese monetary tightening, Chinese Yuan revaluation and
anti-speculation property measures in this region.
We remain convinced that market returns are expected to be rather modest
this year, as the various drivers for market performance are relatively
balanced. While liquidity conditions will be tighter than last year, we
expect stronger than expected earnings growth to support the stock market.
The portfolio is overweight in the transportation sector, while
underweight in the defensive telecommunications and policy vulnerable
property sectors. We expect strong earnings upgrades from the
transportation sector owing to improving volume demand and an upward
trend in rates as a result of supply constraint. While physical
properties have seen significant pick-up in activity, we remain wary of
policy measures to curb asset inflation. We would turn more positive on
companies in the property sector provided their share prices move closer
to their revalued net asset value.
Outside of Singapore, we have built up some exposure to Thailand,
Indonesia and Malaysia from a bottom-up basis. These positions seek to
take advantage of attractive valuations prevailing in those stocks when
selected segments of the regional economies are expected to do well.
These include consumption, plantation and utilities.
The ten largest industry classifications of the Fund's equity investments
held at April 30, 2010 were:
From Reuters published on June 15, 2010