(July 13): Another mandate for Singapore’s ruling party -- along with the opposition winning its most seats ever -- will boost the city-state’s equities, according to analysts.
Prime Minister Lee Hsien Loong’s People’s Action Party retained a firm grip on power but suffered its weakest performance in 55 years in office in an election on Friday as the opposition Workers’ Party won a record 10 seats and secured two group constituencies. A more diverse parliament could lead to better policy reforms that will help the city-state’s companies, the commentators say.
“A diverse set of voices in the parliament mitigates any potential of group think,” said Justin Tang, head of Asian research at United First Partners. “Open and tough discussions will foster even better policies that will ultimately flow down to firms including government-linked companies.”
The Straits Times Index has already been rebounding, rising 19% from a low in March as government stimulus and a reopening of the economy eased investors’ concerns about the impact of the coronavirus on the economy. But even after its recovery, the benchmark stock gauge is still down 18% this year. The gauge rose as much as 0.7% at Monday open before turning negative to lose 0.4% as of 9:27 a.m. local time.
Here are some comments from analysts on Singapore’s election:
Buy Any Dip
“Any dip in markets due to the lower vote share of the PAP should be bought into as Singaporeans have voted for continuity as well as positive change,” said Nirgunan Tiruchelvam, head of consumer equity research at Tellimer. “The market has already seen the worst due to Covid-19 and the U.S.-China trade war.”
“Singapore companies engaged in manufacturing will do better as the government is likely to pursue more reforms” focusing on the sector, Tiruchelvam said.
Watch government-linked companies such as Singapore Press Holdings Ltd., the Sembcorp group, Singapore Airlines group and SATS Ltd., said Tang of UFP.
They are likely to become more nimble, and to adopt new solutions and new management styles as the diversity of voices in parliament leads to change at the government-linked company level, he said.
Upcoming Policy Changes
“Upcoming policy changes would be keenly tracked, with changes to foreign workers policies amidst COVID-19 employment weakness as well as overall fiscal policy/tax code to help pay for continued COVID-19 support measures” being key, Citigroup Inc.’s analyst Patrick Yau wrote in a note on Sunday.
The STI registered 3-9% declines in the one-month period after general elections in Sept. 1988, Aug. 1991 and May 2006 when incumbent’s share of votes declined, according to the note.
Stronger Financial Hub
The policy ideas of Workers’ Party including linking central provident fund’s interest rate to 10-year returns generated by sovereign-wealth fund GIC Pte., paid parental leave, a minimum wage for non-foreign workers will oblige the government to boost consumption and social investment, Prasenjit K. Basu, an economist and political strategist, wrote in a note published on Smartkarma on Sunday.
“Becoming more overtly democratic will also help Singapore compete more effectively with Tokyo, Taipei, Mumbai and Seoul for the mantle of Asia’s leading financial centre that Hong Kong is set to vacate,” according to Basu’s note.