Shares Investment had just concluded our final major event for the year of 2017. At Shares Investment Conference 2H2017 (SIC2H2017), we gathered renowned experts in the local stock market to share their valuable insights.

In this article, apart from Dr Chan Yan Chong since he has his own dedicated column on our websites and publication, we shall highlight the key takeaways from each of our speakers. Here are some pointers, according to the experts, that you will need to be mindful of going into 2018!

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Goh Mou Lih – Property Market Is Foreboding A Rebound But…

The trend of the local property market is always a hot topic amongst investors in land-scarce Singapore. Due to a slowdown in the economy, coupled with cooling measures from the government, property prices have seen a three year decline since 2H13. However, according to property expert Mr. Goh Mou Lih, that is about to take a turn as there are increasing signs that the local property market has bottomed out.

Citing data from Urban Redevelopment Authority, Mr. Goh quipped that the flash estimate of the price index for private residential property has already turned green, increasing 0.7 percent from 136.6 points in 2Q17 to 137.3 points in 3Q17.

Adding on, since May this year, enbloc activities have been warming up with some 2,700 units of private residences been sold, accounting for 0.7 percent of private residential units. Comparatively, only about 600 units went enbloc last year.

While vacancy rate of completed private residential units have increased to the existing 8.4 percent, the recent enbloc sales will likely tighten the vacancy rate in the short-term. Despite that, Mr. Goh warned, while this bodes well for the local property market in the short-term, the enbloc fever could flood the market with significant supply of housing units in the pipeline.

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Liu Jin Shu – Singapore’s Stock Market Is Cheap Relative To International Peers

NRA Capital’s Head of Research, Liu Jin Shu, noted that local stock market posted a much better performance this year. The local barometer Straits Times Index (STI) registered about 17 percent gain and investors’ sentiments are continuing to improve. This year alone, the STI is ahead of most major indices, lagging only behind Hong Kong’s Hang Seng Index (HSI) and Japan’s Nikkei 225 Index (Nikkei).

Despite the run-up, Mr. Liu highlighted that the STI (now at 3,375) is still below the level of 2007 (3,466). Relatively, almost all other major indices are also trading at higher valuations compared to STI. For instance, while the STI is trading a price-to-earnings (P/E) multiple of about 11.5 times, HSI is trading at 13.7 times and Nikkei is at 19.5 times. US and European stocks are trading at even steeper valuations, with S&P 500 trading at 21.7 times P/E while UK’s FTSE 100 is trading at 22.9 times P/E.

Analysing further, Mr. Liu drew to attention that markets trading at lower P/E tended to outperform others this year, suggesting that investors are rotating into value stocks. With improving profitability in the STI, the local stock market may just have the catalyst to drive further upwards. Based on 10-year historical data, the STI averages a P/E of 12.4 times, translating to 3,623 points and hence representing a potential gain of 7.3 percent.

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Buck Tan – Significant Financial Risk Abound

Investors have already seen the longevity of this bull market – 8.5 years since the prior bear market ended in March 2009. Adept market watcher and finance expert Mr Buck Tan flagged, that despite brighter outlook and improving optimism, investors should stay edgy about the significant financial risk abound.

For one, investors should be cautious about rising margin debt fueling the global economy. After the sub-prime crisis in 2008, margin debt has increased dramatically by 222.9 percent from US$173.3 billion to US$559.6 billion by September 2017 – the highest in history. From past data, margin debt and S&P 500 index share a strong correlation: when margin debt contracts significantly, S&P 500 plummets.

Mr. Tan further elaborated, while the S&P 500 delivered slightly above 200 percent in real growth since 1995, margin debt has registered above 400 percent in real growth over the same period.  Now imagine the financial burden in a rising interest rate environment.

Meanwhile, emerging markets (EM) accounted for the largest growth in total global debt. As of 2016, EM has US$56 trillion of debt or about 215 percent of Gross Domestic Product (GDP). Comparatively, in 1996, EM only accounted for US$7.4 trillion of global debt, about 126 percent of GDP. As at 3Q 2016, EM’s debt-at-risk amounted to 26 percent of GDP!

That said, Mr. Tan noted that it is not all doom and gloom. For ASEAN, institutional investors and funds know that the ASEAN region has the lowest dependency ratio. Given its youthful and vibrant workforce, growth opportunities will also be shifting into Southeast Asia.

For retail investors, Mr. Tan recommend to look into S-REITs as they have tended to rise in tandem with interest rates in the past. Gaming stocks are also options to ride on ASEAN’s booming middle class.

See You Again In 2018

There you have it, the wisdom from the pros. In the coming year of 2018, Shares Investment aims to host even more of such meaningful events to benefit retail investors. For future events, articles and market updates, visit our website at www.sharesinv.com! Thank you again for your support!