This year’s National Day Parade (NDP) song Not Alone was described online as “touching, inspiring and relatable”. Written and sung by Singaporean singer-songwriter Benjamin Kheng, he wanted to “connect Singaporeans back to the meaning and the feelings of lyrics we hear every single year. And he did just that. A homage to our past, avoiding the jingoistic language from the 80s that we sing at observance ceremonies in workplaces, schools and community events in the month of August. It is still some way from our evergreen Dick Lee tearjerker sung by Kit Chan in 1998s Home. Even when Not Alone evokes the river, and as a reflection of our times, instead of declaring “where I belong”, it asks, “How do I know?”
I was delighted we had a fitting tribute to Senior Minister Lee Hsien Loong for his 20 years as Prime Minister at our Nation’s birthday party at the Padang. It was also the first NDP for new President Tharman Shanmugaratnam and Prime Minister Lawrence Wong. Conventional wisdom suggests that one does not change both chairman and CEO within a year. But we have done so peacefully and successfully as the Singapore story evolves to SG60 next year.
Mother Nature too got into the act by delaying kitefoiling races in Marseille. Even the final races on the day enabled Singaporeans to cheer Max Maeder on to our first Olympic medal since 2016, right after the NDP show finished. While gold would have been nice (maybe next time), a very credible bronze medal is still something to rejoice in.
Maybe in this topsy-turvy world we live in, we don’t need to be No 1 in everything. Keeping our heads down and being friends with both East and West by being stable, predictable and boring has its merits. We open our doors to competition and free markets, embracing capitalism. By growing the pie, we will have more to distribute and share collectively through redistributing tax dollars and individually through philanthropy. If we have a “strengthen(ed) social compact”, we can indeed “work together to scale new heights”, as extolled by Wong in this National Day Message.
Safe haven in a global storm
The wild gyrations of early August highlighted in Cruel Summer (Chew On This, Issue 1150, Aug 12) have temporarily eased up. The cost of Nikkei or Nasdaq put options is still multiple times that in June as the VIX, which has eased from extreme 65 levels on Aug 5, settled in the 20s. This was still at levels of two-and-a-half times in spring when markets forgot about wars in the Middle East and a US election getting closer but ever more unpredictable.
In Japan, a record 12.4% fall one day and a 10% rebound the following day saw the index trigger bear market signals (a drop of more than 20% in just three days) on the whole index. While such moves would be considered extreme even for individual stocks, the unwinding of retail leverage, global risk-off, profit-taking or cash-raising resulted in many forced sold margin accounts being flushed out.
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Topix’s roller-coaster ride of early August may not be over, as a friend of mine reached out to ask how to short Japanese markets. I was surprised that he was more motivated to do so by the Japan Meteorological Department’s warning of a megaquake risk following a quake measuring 7.2 on the Richter scale off Kyushu’s coast from Miyazaki than the technical chart that shows the Nikkei retrace net following the selloff has slowed up at the halfway point. I hope if he is proven right, it will be for the wrong reasons, as I have paid the rest of my deposit ahead of a Mt Fuji climb in September.
It also remains uncertain if Warren Buffet doubled his bets on five Japanese trading houses in the selloff. After all, Berkshire Hathaway just a month ago had a record US$200 billion ($265 billion) cash hoard after selling almost half its stake in Apple, among others. The legendary investor joined the “bad” yen carry trade the right way, as Barron’s recently described it, by using the yen to fund the acquisition of Japanese assets and not that in other countries. The Nomura-Lion Japan ETF listed on the Singapore Exchange S68 (SGX) saw a drop of 7% during the period where the main indices gave up more than 20% as an appreciating yen cushioned the initial downside before the market recovered. A correction for the Nikkei after breaking through its 40-year market cap is in order, but like earthquakes when they come, I hope it will be shallow.
US tech bulls also point to a steadying of the Nasdaq ship after Aug 5’s 10%–20% meltdowns on many individual stocks. This is yet another example of how buying the dip (perhaps better described as a drop) was not catching falling knives on a technical chart but ultimately rewarding. After all, the Nasdaq finished the second week of August higher for the week. Chew On This is not convinced. Even if Nvidia had bounced off US$90 back to the US$100 mark, the stock appears on its way down as Big Tech looks set to cut AI chip spending and competition kicks in.
Coincidently, Nvidia CEO Jensen Huang sold US$323 million of stock in July before its decline. In fairness, it was executed as part of the 10b-5 trading plan already announced in March, where he has so far raised US$500 million in cash. The market gods are perhaps more with him than his stock price direction for now.
In contrast, back in Singapore, Piyush Gupta’s occasional share sales raised some eyebrows each time he did a bit of wealth diversification. However, each time, DBS Group Holdings’ stock price, along with its results, has reached new highs, up to its recent relatively mild correction in the midst of the global storm.
A three-day selloff of less than 10% still leaves DBS up 11% for the year, excluding bonus issues and higher dividends. In classic Singapore-style leadership succession, the eponymous CEO, who has led the bank’s transformation for 14 years, announced Tan Su Shan as deputy CEO to take over next year when he turns 65. With a strong team around her — reminiscent of a selection process like the country’s political leadership — shareholders can look forward to more good years ahead.
As bank stocks lowered the Straits Times Index (STI) to 3,200, including a one-day fall of 4% or about 150 points on Aug 5, local commentators described Singapore’s version as part of a global selloff as a “collapse”. We were obviously not alone in any global selloff, but I can’t imagine what terms they would use to describe market moves of 10%, 20% and 30% in Nasdaq, Nikkei and Bitcoin, respectively.
But we are Singapore. With the index settling at 3,260 for National Day, which is the middle of our trading range in the last four years before the early July breakout above 3,400, this drift-back is less likely to give anyone a heart attack, unlike our overseas forays.
Local hero
Hyperbole aside, I was glad I executed what I wrote last week and managed to re-invest some CPF monies in the STI ETF close to the tail of the pullback. I was hoping to buy more at lower levels, but a quick short-covering relief rally in global markets left orders unfilled. My only decision was whether to “contra” in a couple of days and take a quick profit or collect a post-National Day ex-dividend and let it try for a 3,400 break again. I opted for the latter.
As thin summer liquidity exaggerates global volatility, the yen carry trades are still heading in the unwind direction. Notwithstanding the Bank of Japan’s kind words of moderating rate rises — the Fed will cut, slowly (as market panic eases for the time being) perhaps. There is unlikely to be an intra-meeting cut earlier in August as hoped by panic-stricken traders. September may see a 25 bps (basis point) cut instead of a 50 bps cut.
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Whichever the case, the US market will move first (my bet is down) in response before the headlines and narratives declare whether investors fear recession if the Fed acts with a 50 bps cut or the selloffs may be explained as the Fed moving too slow if they cut 25 bps.
During the interim, the window to exit US tech markets may open again for those still long in the lead-up to the Fed’s September rate decision. I am still convinced that a major correction in the S&P will only take place after the US election. The “fast and furious’ we have seen in summer thus far is possibly a foreshadowing of what is to come.
That being the case, I have been reminded of all the Singapore favourites mentioned in my column this year. These include Singapore Telecommunications Z74 , Sats and ST Engineering, which continue to do well, and Singapore Post S08 and Singapore Airlines C6L , which, while rewarding with 10%–15% trading ranges, are currently in an air pocket. I have generally stayed clear (perhaps deliberately) in commenting about another “S” in the group: My previous employer, SGX. But it is time I talk about it.
Trade on Singapore
Recent attention has been focused on the state of the local stock market and Minister Chee Hong Tat’s announcement of a capital markets committee (we had speculated on that in early June) made at the SGX offices itself. There have been mixed reactions about how long (one year) it would take and the composition of the committee. Some cynical ones also believe that plans and decisions have already been made and lines have been drawn clearly in parliamentary statements. Others more hopeful point to the recent regulatory “Big Bangs” in the UK or KWAP, the custodians of pensions for Malaysian civil servants, declaring that it is increasing its domestic capital market allocation — ideas that the committee could take a leaf from.
Chew On This is not quite as cynical and reckons that if we were going to make serious changes to address complex system and ecosystem issues as articulated over three columns in June, then it does take a holistic approach across the public sector and better take longer to make bigger changes than rush out more short-term bandaids.
But all this is a distraction. As a company, SGX just declared single-digit percentage increases to $1.23 billion in revenue, $525 million in adjusted net profit and dividends of 2 cents to 36 cents per year or 9 cents per quarter. The results were driven by commodities and currencies, as its multi-asset exchange strategy continues to deliver even if analysts and media always ask about IPOs.
Yes, more IPOs and higher stock market volumes would be nice. Let me suggest that the complainers should do something about reviving the market themselves, like take capital back from US tech and invest here instead of trying to list their company in Malaysia (now that KL is this year’s IPO market in Asean). Wishful thinking aside, the committee’s attention will help in time.
For now, I expect more global volatility, but SGX acts as a risk management hub. As volatility in Japanese markets increases, so too do the trades on Nikkei 225 futures and USD/JPY. SGX’s Taiwan futures contracts also benefit from TSMC’s (Taiwan Semiconductor Manufacturing Company) volatility. For those who expect a recovery in risk allocation in China, SGX offers Chinese equity and renminbi futures. Iron ore futures and freight volumes are proxies of inflation and geopolitical crises in the Middle East. Last but not least, those with a favourable outlook on India can trade the rupee and Nifty futures.
However, it is business and growth but not just for the local stock market. Like Singapore, because it is safe, boring and robust, the world trades through SGX, the strongest clearing house in Asia. Come September, when my final batch of SGX share awards vest, I would probably hang on to them this time.
Chew Sutat retired from Singapore Exchange after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange, and he was awarded FOW’s Lifetime Achievement Award. He serves as chairman of the Community Chest Singapore.
