How will Singapore’s market mask up in light of COVID-19?

COVID-19 – A virus originated from the province of Hubei, China that took the world by storm. First discovered on the 1st of December 2019, the highly infectious pathogen has transmitted its way all over the globe. To date, there have been over 75,000 confirmed cases of the infection and as each day passes, the numbers soar. Many economists, financial analysts and investors have taken an interest in how large-scale pandemics such as the ongoing one may have effects on Singapore’s market. Unfortunately, Singapore currently ranks 2nd for having the highest number of infection rate outside of mainland China, leaving many investors, tourists and economists unsure and wary of the local market.

For those who may not know, Singapore is a top destination not only amongst tourists from China but also for investors and high-profile individuals seeking to purchase high-end properties in Singapore. This is attributed to the good legal and financial system established in our lion city which ensures that investors and their investments are binding and assured, building high investor confidence. In 2017 alone, Straits Times published that a whopping $37.6 billion was traced directly from Chinese investors, seeing a 10% yearly increase. However, given the onset of the outbreak, the Singapore government has decided to ring-fence the viral spread to the rest of the Singaporean community which meant that it had to impose a travel ban unto incoming Chinese nationals from mainland China. But what does this spell for Singapore?

Tourism

The most direct impact would be on our tourism dollar. In the first half of the fiscal year 2019, a total of $13.1 billion dollars came from tourism spending according to the Singapore Tourism Board (STB). With Chinese nationals being the biggest contributing source of spending, the travel ban would cause a sharp dip in tourism numbers and spending. Additionally, tourists from all over the world are postponing travel plans into Singapore due to the high numbers of infected persons. Mega malls in Singapore such as Marina Bay Sands and Ion Orchard have reported more than 50% drop in sale numbers since the imposition of the travel ban.

Property Market

Amidst fears of the outbreak and imposition of the travel ban, the Asian market has seen dramatic downturns, with Singapore’s index reaching a low of 1.8% in the rear of January 2020. Out of fear for health reasons, many local homeowners of luxury homes such as condominiums and Good Class Bungalows (GCB) in high-end estates such as Sentosa Cove and Orchard road have restricted viewing and sales dealings with persons from China. Coupled with the fact that Chinese nationals are unable to gain access into Singapore temporarily hence unable to scout and seal deals, the market for premium and luxury homes in prime districts have seen a dip. In addition, the resale market has also seen a decline in viewing and closing rates. Many locals are averse to exposing themselves to strangers for fear that they may be unknowing hosts to the highly infectious virus. Hence, experts believe that Q1 2020 will see a dip in the housing market.

Many value investors are also caught in a dilemma, to invest in properties or not to at this current point in time. Many are hoping that property prices will free fall, like what happened in 2002. Back in 2002, Severe Acute Respiratory Syndrome (SARS) spread like wildfire all over the globe, striking fear in the hearts of many. But what many did not know is that just prior to the outbreak, Singapore had already weathered several blows from other global complications such as the Iraq War and US recession in 2001.

The SARS outbreak was just the tip of the iceberg. In order to stabilise the economy and encourage spending, the government had to introduce drastic cooling measures such as the complete eradication of the seller’s stamp duty which were set in place since 1996. As such, many buyers with liquid cash wealth jumped at the deals. One example was the sale of 11 out of 27 of OCBC Bank’s freehold condominium mortgagee units at Robin Regalia, at a 30% discount of $700psf.

However, market conditions may not replicate those in the dire times of 2002. In fact, governments all over the world aided with improved healthcare and technology have embraced the pandemic with greater preparedness. So it can be difficult to decide if value investing is the most viable at this point in time.

Regardless of whether things turn for good or for worse, remember to stay calm and do what helps you stay healthy. Together as a nation, we would get past this hurdle to become a stronger nation tomorrow.

Clive Chng

Clive graduated on the Dean’s list from Nanyang Technological University with an Engineering degree. Prior to joining Redbrick, he not only served as a Project Manager for Keppel Shipyard where he oversaw multi-million dollar marine projects, but was also the Vice President for Keppel Young Leaders, focused on the development of future leaders. Being a fan of low-cost Index Funds, his passion in Investing and strong interest in understanding how financial markets shape economies ultimately fuelled his move from the field of engineering into the financial industry where his personality trait as a servant leader further allows him to service his clients effectively.
Clive Chng

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