Singapore stocks hold up well this year

As stagflation concerns affect the outlook for the world's biggest developed markets, shares in a small Asian city-state have held up surprisingly well this year.

Singapore's Straits Times Index eked out gains of 1% in the year 2022, the only developed-market gauge in positive territory in dollar terms. A world gauge is down 22% in what could be its worst year since the 2008 financial crisis.

A rising interest-rate environment, a shift towards cheaper valuations and economic tailwinds generated by Singapore's Pandemic recovery have helped underpin the benchmark, where banks account for about half of the weighting.

Alan Richardson, portfolio manager at Samsung Asset Management HK Ltd said that Singapore's performance correlates with the outperformance of value over growth, which is expected to continue as long as the Fed remains committed to bringing down inflation to the long-term target rate.

The benchmark has a lack of exposure to tech shares, which contrasting its performance with the US and Europe, economies that are struggling with issues ranging from inflation and energy shortages to supply-chain disruptions.

Daniel Dubrovsky, strategist at DailyFX, said that developed markets probably won't catch up with Singapore unless the Fed slows or pivots. The labor market still has room to absorb a near-term slowdown in the US, despite Australia's smaller-than-expected rate hike this week.

Earnings estimates for Singapore stocks have gone up about 16% year-to-date, about four times the increase seen for members in the global gauge. Singapore's trade-dependent economy isn't without risk factory activity contracted in September for the first time since June 2020 and retail sales show signs of slowing.

The top performer on the Straits Times Index this year is Jardine Cycle Carriage Ltd., up 72%, followed by utilities firm Sembcorp Industries Ltd.'s 53% advance. The share of DBS Group Holdings Ltd., the biggest stock on the gauge, is up 2.3%.

Facebook is the only game in town for digital political ads.