ETFs: Three Ways For Investors To Get A Stake In ‘Singapore Inc.’ (EWS, SGF, EWSS, FXI)
Tony Sagami: I have a big smile on my face right now. Why? I just finished a trip to Singapore, my favorite city in all of Asia. Even though I was born in Japan, still have family there and have a strong emotional connection to my Japanese roots … Singapore is my favorite Asian destination.
What is there to love about Singapore? Lots! Whether you’re a traveler, resident or an investor, there’s truly something to satisfy your appetite for excitement there.
Anytime you invest overseas, even if it’s from the safety and familiarity of the U.S. exchanges, it’s helpful to get a picture of exactly where you’re investing. Today I’d like to give you a bit of a tour of Singapore like you won’t get anywhere else, and explain why it’s worth considering for more than just a (virtual) visit.
A Journey Unlike Any Other You’ve Been on So Far
Your first hint that you’ve arrived at a special place is the ultra-modern Changi Airport, which is consistently rated as the No. 1 airport in the world.
The efficient and spotlessly clean Singaporean rail/subway system will then whisk you past perfectly maintained, unclogged roadways to the cleanest, most-modern downtown you will ever see.
Shoppers will find heaven at fashion emporiums that dominate Orchard Road, and foodies will find gastronomic heaven on earth.
Singapore’s strategic location at the tip of the Malaysian peninsula and gateway for the Strait of Malacca has turned it into a melting pot of Chinese, Malaysian, Indian, Japanese, Korean, Indonesian, Ceylonese, English and Dutch influences. The merger of all those countries has blessed Singapore with the most unique and delicious foods in the world.
Char kway teaw, katong laksa, fried Hokkien mee, Sambal stingray, oyster omelette, clay-pot seafood, fish head curry, mee gorang, and my favorite dish in the world … chili crab.
And the Singaporeans are wonderful, friendly, welcoming people. Everybody I meet — from top-ranking officials in the Singaporean Air Force, money managers running billions of dollars, and jumbo real estate developers all the way to waiters, secretaries, and taxi drivers — treated me like a long-lost cousin.
An Attractive Model That Every Investor Can Appreciate
But what impresses me the most about Singapore is the amazing frenzy of commerce and economic activity. There is a unique urgency and focus on business that you won’t find anywhere else in the world.
While I was there, I met with one of the largest hedge fund managers in Asia, who described his country as “a Republican’s dream come true.” What he was talking about is the energetic, free-market enthusiasm and spirit that oozes from both the private and public sectors.
The economy of Singapore is best described as a mixed economy. Although the country strongly advocates free-market policies, the government is extremely involved in the macroeconomic management of land, labor and capital resources.
This highly successful economic system — where both the market and the government have equally strong roles in the government — is referred to as the Singapore Model.
According to the 2011 Index of Economic Freedom, Singapore is the second-freest economy in the world. For example, it takes just three days to start a business in Singapore … compared to the world’s average of 34 days.
Ever tried to start a business in the United States? I have, several times, and the paperwork and meddlesome government interference makes all but the driven entrepreneurs toss up their hands in surrender.
Singapore, on the other hand, knows that business creation is the driver of economic growth. Singaporeans admire success and applaud their top 1% instead of attacking them like the Occupy Wall Street crowd, the mainstream media and the American liberal left.
Even More Reasons to Love Singapore
There are many more reasons to like Singapore as a destination for more than just a vacation.
- The 2011 World Bank Ease of Doing Business Index ranks Singapore as the best country in the world to do business.
- Singapore is also the only Asian country to have AAA credit ratings from all three major credit rating agencies: Standard & Poor’s, Moody’s and Fitch.
- The country has a population of roughly 5 million people and has an enviable unemployment rate of 2.2%.Singapore has the third-highest GDP per person in the world, behind only Qatar and Luxembourg.
- Singapore is the 14th-largest exporter in the world and is home to the busiest shipping port in the world. Today, over 60,000 ships pass through the Strait of Malacca.
- That equals about 160 ships every day, and they carry about one-quarter of the world’s traded goods — including oil and many of the goods manufactured in China (NYSEArca:FXI).
- Although there isn’t a drop of oil to be found anywhere in Singapore, it is the 18th-largest oil exporter in the world. How? Singapore imports oil from other countries and further refines it to sell to other countries. Singapore has the third-largest oil refinery in the world, behind Rotterdam and Houston.
- The government has mandated that English be the primary language used at all levels of the school systems, giving it a highly-educated workforce that speaks the international language of commerce.
- The Singapore economy is growing like mad. It grew by 14.5% in 2010 and by 9.4%, 1.0%, and 6.1% in the first three quarters of 2011.
If you are an investor, Singapore — known by many as “Singapore Inc.” for its business-friendly environment and even business-like way the country is run — is definitely worth considering for your portfolio.
3 Ways to Invest in ‘Singapore Inc.’
The easiest way to put some Singapore into your portfolio is with either the iShares MSCI Singapore ETF (NYSEArca:EWS) or The Singapore Fund (NYSE:SGF), a closed-end fund that pays out a very alluring 10%-plus dividend.
Plus, there is a brand-new and very interesting Singapore ETF. The iShares MSCI Singapore Small Cap ETF (NYSEArca:EWSS) seeks investment results that correspond to the performance of the MSCI Singapore Small Cap Index.
This ETF offers exposure to small-cap stocks in Singapore by investing in 37 stocks, about half of which are financial and real estate firms. The underlying index has an average market cap of about $1.1 billion, compared to more than $16 billion for the big-cap EWS.
I do believe that you can do much better with a carefully selected basket of Singapore’s best companies, but ETFs are a great way to dip your toes into the Singapore stock market.
I am not suggesting that you rush out and buy any of these funds tomorrow morning. As always, timing is everything, so I recommend that you wait for my buy signal in my Asia Stock Alert service. (Not a member yet? Take the service for a risk-free test drive today — click here to get started.)
Singapore is one of the most dynamic, fastest-growing countries in the world and one that should be on every investor’s radar screen. Be sure to put this country on your travel bucket list, chili crab on your gastronomic wish list and one of these investment ideas on your “must have” list.
Uncommon Wisdom (UWD) is published by Weiss Research, Inc. and written by Sean Brodrick, Larry Edelson, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in UWD, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in UWD are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Roberto McGrath, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Marty Sleva, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.
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