Guest Author - Guido Deboeck

In my previous article I wrote about a book on Singapore’s Success, written by H. Ghesquiere, former Director of the IMF-Singapore Regional Training Institute. Ghesquiere retired from the IMF and is currently an Adjunct Professor at the Lee Kuan Yew School of Public Policy in Singapore.

I asked him to explain the rise of the Singapore stock market. You recall from the previous article that in 2006 EWS – the iShares for Singapore -- increased by 57% and that since January 3 of this year EWS moved by 9.1% (as off the close of 02/22/07). This is substantially better than the S&P500 that increased by some 15% in 2006 and so far this year moved by only 2.6% (see the charts in the previous article). These rates of return are also better than the MSCI World Stock Index…

In response to my question Professor Ghesquiere wrote:
“As to Singapore's stock market, the rise since October 2006 has been amazing indeed. My book, Singapore’s Success, is however about the economy and I have no particular insights in the short term dynamics of Singapore's stock market--the link between both can be tenuous over long stretches of time.”

Reasoning as an economist there is of course good cause for calling the link over the long run tenuous, but as an investor interested in making a decent return or even better outperforming a benchmark (like te MSCI World Stock Index) this may not matter too much!

So I asked Professor Ghesquiere to provide us his thoughts on the “short term dynamics of the Singapore market” ?

Ghesquiere: “ First, I would allow for the performance of world equity markets in general and Asian emerging markets in particular, including China, since October 2006, as a base line. To the extent that these have also gone up, some of them sharply, we need to explain only the over-performance of the Singapore market, which is still very impressive even in relation to these comparators”.

Could you be more specific about what is unique to Singapore?

Ghesquiere: “ First the country's economic growth prospects have improved quite a bit since October 2006. Its economy is highly dependent on world demand and on the US economy in particular.

To the extent that the perceptions of a "goldilocks" economy in the US or a soft landing have dispelled earlier fears of a slowdown, possibly linked to the housing market, Singapore has benefited directly.

Second, Singapore's economic growth in 2006 was revised upward to 7.9 percent. All the signals are of a booming economy with construction up, financial services up, employment, year-end bonuses (not only for the financial sector but here across the economy) etc...

Third, looking forward many elements seem to fall in place and Singapore continues to re-create itself through new niches all the time. The 2007 budget that was just announced was well received.

Finally, both Zulauf and Faber highlighted Singapore in the recent Barron's Roundtable as their pick and perhaps they have had some influence as well. Finally, P/E ratios and the like were probably somewhat lower compared with other markets, e.g US.”

These are great insights from someone who is in Singapore, who knows the local scene, and is an expert on Singapore’s economy growth.

Ghesquiere: “Again, I am not at all a specialist on the stock market and on how sustainable this rise is over coming months…“

Looking forward Professor to continue receiving updates on the economy and stock market in Singapore...and maybe even other Asian countries.

Singapore’s Success is now available at Amazon.com ( a link is provided below).


710 words 2.36 minutes at 300w/m