4 min read

Asia Tea Time - Cup 13 ☕

This week, I cover news on Singapore, Mapletree, and Thailand's recent elections.

In case you missed it, I wrote about the 1 big problem I see in Singtel's dividend after the company released its latest earnings this week. 

Macro in Asia

Singapore and China establish ETF link-up

Singapore and Mainland China signed a new agreement which will connect their respective markets to each other’s.

This will be done via a master-feeder fund model, with investors accessing ETFs that will allow them to invest in ETFs in the two markets.

Why it’s happening

  • Singapore is looking to adeptly manage its relationships between the two superpowers – it doesn’t want to be on the bad side of either.
  • While senior Singapore politicians regularly talk about the negative consequences of rising tensions, the reality is that the country is likely to be a beneficiary of both China and US investment.

Why it matters

  • Singapore’s stock market is looking for ways to grow. Its stock exchange operator – SGX – signed an agreement with the Shenzhen Stock Exchange about 18 months ago to link up the two exchanges.
  • Singapore’s stock market is losing out to the Hong Kong stock market, with the companies listed on the Chinese city’s exchange worth almost nine times as much as those listed on the former.

What’s next?

  • Watch out for investment deals in Singapore from both the US and China as they vie for soft power in the Southeast Asia hub.  

Tim’s Take

Unlike the Hong Kong Stock Connect programmes with the Shenzhen and Shanghai stock exchanges – which have been around for nearly eight years now – this Singapore ETF connect appears a lot more limited.

Because of that, investor interest and take-up is going to be a hard sell. Although Chinese investors are interested in gaining more exposure to Southeast Asia, doing it via ETFs probably isn’t the ideal route.

The price action and liquidity in the Singapore stock market is also relatively lower versus a market like Hong Kong, which Mainland China investors have gradually become more comfortable with.

More than anything, it’s a chance for China to highlight its intent to continue building financial links with Southeast countries.

Company spotlights

Mapletree Industrial Trust expands mandate to Japan with acquisition

Singapore’s Mapletree Industrial Trust – a data centre and industrial REIT with properties in the US and Singapore – announced that it was acquiring a maiden Japanese data centre in Osaka.

The purchase price is JPY 51.8 billion (S$505.9 million), part of which will be funded by a private placement.

Why’s it news?

  • Remember that Japan’s stock market in on fire right now? Its economy isn’t doing too bad either. Last week, it was revealed that Japan’s GDP expanded by an annualised 1.6%.
  • This supportive backdrop is attracting foreign investors back to the market, particularly in good ol’ reliable real estate.
  • For Singapore’s REITs, this latest acquisition (and subsequent fundraising) are perhaps harbingers that the biggest REITs feel confident enough to go out there and do some serious shopping.

Why it matters?

  • Japan’s currency, the Japanese Yen, is weak right now. It fell past 150 to the US dollar last year and in Singapore, the Singapore dollar is near an all-time high versus the Yen.
  • This acquisition also gives Mapletree Industrial Trust another avenue for growth in the Asian data centre market – a hot commodity right now – given its only geographic exposure to data centres currently are Singapore and the US.

What’s next?

  • Look out for more deals being done in Japan and South Korea as countries look to more developed Asian markets as a form of diversification of any China risk.

Tim’s Take

Japan is an attractive investment destination for a couple of reasons. First off, the Japanese yen is weak so acquisitions are cheaper for foreign-based firms.

Secondly, and this might be the dealbreaker, interest rates are still ridiculously low there. In fact, they’ve been negative since 2016 and remain so today, with the Bank of Japan holding its rate at -0.1%.

The upshot? Funding (i.e. what you pay to borrow) is cheap when you compare it to markets like Europe or the US. For REITs, that’s a sweet deal as their growth is based on taking on debt.

Tim’s money tip of the week

The recent rally in the US stock market – based on the AI hype and some revisions to guidance from chip giant Nvidia (NASDAQ: NVDA) – have understandably got investors excited.

However, in this environment of heightened emotions, it’s easy to get carried away with some of that gains out there and jump on the trading bandwagon.

It’s worth remembering, though, that if you’ve got a long-term financial plan then you just need to stick to it. Buying and holding the market tends to be the answer over the long term.

No matter whether the stock market is down big or rallying hard (like it is now), continuing to invest every month is always going to pay off.

Why? Because the world’s largest stock market has delivered around 10% annualised returns over the past 120 years. Keep that in mind and happy investing!

Story of the week

The resounding win in Thailand’s general election – with a mandate for serious change – is causing some upset.

That’s because the Move Forward Party’s (MFP) leader Pita Limjaroenrat lead his party to a crushing defeat of current leader and former army chief Prayuth Chan-ocha.

However, with Pita now set to become Prime Minister and looking to form a government, Thailand’s Election Commission (EC) has decided that it’s now a good time to look into his shareholdings.

What a coincidence! And it looks like they may have “found” something untoward in terms of some media shares he owns.

Of course, that would have nothing to do with his election win or the fact that the EC is stacked with army loyalists. It’s anyone’s guess where it goes from here.