1. The Singapore Minister for Finance Mr. Lawrence Wong delivered his Budget Speech in Parliament on 18 February 2022.
2. Typically, every year, the Singapore Budget has a limited broad impact to the near term outlook of the Singapore stock market. There are a couple of reasons for this. The first is that the major companies that comprise the Singapore stock market indices are typically regional businesses that reflect Singapore’s regional hub status, for instance, CapitaLand, ST Engineering, Singtel or Wilmar, just to name a few. These companies tend to be less impacted by domestic Singapore policies. Secondly, changes in government policy in Singapore tend to be incremental in nature and well-communicated, due to the long term planning afforded by the Singapore government. This stable policy framework is a key attractiveness of the Singapore market as a safe haven in the region.
3. The exception to this would be the impact of the Budget to the Singapore real estate market. Property prices tend to be volatile, and so macro-prudential measures do come into play from time to time. Changes in policy tend to impact the property-related stocks, and to some extent, the major Singapore banks.
4. In the near term, the specific impact of the Budget to certain sectors are likely to be measured and incremental. Morgan Stanley gives a succinct summary:
“Whilst wealth taxes were being considered as part of the budget announcement, but no estate duties or net wealth taxes were announced, which we see as a positive for Singapore banks and their growing wealth businesses. Instead, residential property taxes will be raised – we estimate from roughly 0.2% p.a. of the property’s value to 0.4%. We think this is an incremental negative for property developers, which have had to contend with higher stamp duties since December 2021. Carbon taxes are also set to increase, by more than tenfold by 2030, which we see as improving opportunities for energy/utility firms planning to develop a carbon credit marketplace and carbon consulting services.”
Source: “Singapore Equity Strategy: Singapore Budget Takeaways”, Morgan Stanley, 18 Feb 2022
5. Beyond the near term, the thrust of the Budget is more significant. It aligns with the key megatrends that we have identified in our Lion Global Investors Singapore 2022 Strategy Outlook.
6. In the area of technology, the technology developed by consumer focused tech companies like Google, Tencent or Amazon in the areas of big data, artificial intelligence and data analytics, are starting to be made more accessible to real economy industrial companies. The time is ripe for companies in Singapore for technological convergence of computing power into industrial applications in a variety of areas to improve productivity, such as in 5G telecommunications, industrial automation and robotics, and create new use-cases, such as in renewable energy and life sciences. In the Singapore Budget, the Minister has set aside an additional S$200 million over the next few years to enhance schemes that build digital capabilities, S$25 billion in Research, Innovation and Enterprise, as well as S$600 million in Productivity Solutions Grant for small-medium enterprises (SMEs). With technological convergence, we can expect these Budget support efforts to enable companies to utilise the latest technology to unlock significant upgrades in productivity by going digital in an era of Industry 4.0 and beyond.
7. Secondly, we can expect the Green Transition towards Net Zero to offer opportunities for energy and utilities companies in Singapore. The Green Transition is likely to be a major secular trend over the coming decade, offering opportunities for companies in Singapore to build and invest in the renewables grid regionally and globally. At the same time, the transition is likely to come at a cost, with the price of crude oil already approaching US$100 per barrel even before factoring in the post-pandemic global demand for energy. Singapore companies in the energy and commodities space can potentially benefit from short term tightness in the commodity markets, whilst having the optionality of repositioning their businesses towards opportunities in the renewables space.
8. Finally, Singapore remains the pre-eminent British rule of law-based safe haven in the Asian region amidst geopolitical uncertainty. The Finance Minister also gave the example of the company BioNTech establishing its regional headquarters in Singapore, as evidence of the continuing attractiveness of Singapore as a progressive jurisdiction for global talent and companies.
9. In addition, whilst the increase in residential property taxes may be viewed as headwinds to property prices, more fundamentally, recent increases in property prices in Singapore underlie the attractiveness of Singapore as a store of wealth, and hence strengthen Singapore’s status as a regional financial hub.
10. Overall, as the Finance Minister has mentioned, the Budget 2022 has also set its eyes on the future beyond pandemic relief measures. The Budget measures to encourage the adoption of technology, the Green transition towards a Net Zero world, as well as efforts to enhance Singapore as a progressive safe haven, ride on global megatrends that can reposition the Singapore economy and its equities market towards a position of strength over the next few years.
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