Economist, Centennial Asia Advisors

Jason Tan

Economist

Centennial Asia Advisors

At Centennial Asia Advisors, we tell it like it is. We have no vested interests, no need for a China wall, and no reason to skew our outlook any other way. With over 30 years experience covering Asia’s political economy, you can be sure our conclusions and analyses are based on the unadulterated facts. Through years of fine-tuning our research methodologies, we deliver a quality of macroeconomic analysis few other houses can match.

Centennial Asia Advisors is an independent research and advisory firm that works with governments, multilateral institutions, financial firms and leading MNCs.

Economic Policy and Strategic Advisors

Macroeconomics

<ul><li>Singapore’s economy grew robustly in 4Q16, powered by a strong export rebound but construction contracted and services eked out a tiny expansion. January trade was strong.</li><li>As the output gap remains negative and non-tradeable inflation tepid, inflationary pressures are unlikely. The MAS will no longer ease monetary policy.</li><li>The burden now shifts to fiscal policy to provide support to a number of beleaguered sectors. Budget 2017 should sketch out the finer points of the CFE recommendations.</li></ul>

Singapore’s economy grew robustly in 4Q16, powered by a strong export rebound but construction contracted and services eked out a tiny expansion. January trade was strong.As the output gap remains negative and non-tradeable inflation tepid, inflationary pressures are unlikely. The MAS will no longer ease monetary policy.The burden now shifts to fiscal policy to provide support to a number of beleaguered sectors. Budget 2017 should sketch out the finer points of the CFE recommendations.

Singapore: Policy Burden Shifts from Monetary to Fiscal

Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

REAL-Economics.com

The cyclical clouds have all cleared, and Singapore will return to 3% real GDP growth in 2017, constrained only by the slow growth in net employment (a function of the curbs on inflow of foreign workers). Helped by a fiscal stimulus, real GDP grew 2.9% YoY in 4Q 2016 (vindicating our view from 5 months ago: <a href="https://www.smartkarma.com/insights/singapore-the-gloom-doom-is-overdone" target="_blank" data-smartkarma-citation="insights:5216">Singapore: The Gloom &amp; Doom Is Overdone</a>), and January's NODX stayed strong, with surging non-oil retained imports suggesting cyclical export strength is set to persist through the rest of this quarter. The cyclical rebound in electronics demand helped productivity grow at its fastest pace in 5 years in 4Q 2016, despite sluggish machinery investment. But net investment commitments rebounded in 4Q 2016, auguring well for machinery investment by 2Q 2017. Construction contract awards (a 1-year leading indicator of construction activity) have been strong for the past 5 months, suggesting a modest construction recovery too in 2H 2017.While the services sector remains soft (hurt especially by the sluggishness in financial and business services), the cyclical manufacturing sector is in rude health: January's exports were robust despite the CNY impact (given that CNY was in January this year, but in February last year). There is scant need for additional fiscal stimulus in the year ahead, given these tailwinds. However, with property prices down only 11.3% from their 2013 peak, we expect the property curbs to remain, and the zero-appreciation policy for the S$NEER to be maintained.

The cyclical clouds have all cleared, and Singapore will return to 3% real GDP growth in 2017, constrained only by the slow growth in net employment (a function of the curbs on inflow of foreign workers). Helped by a fiscal stimulus, real GDP grew 2.9% YoY in 4Q 2016 (vindicating our view from 5 months ago: Singapore: The Gloom &amp; Doom Is Overdone), and January's NODX stayed strong, with surging non-oil retained imports suggesting cyclical export strength is set to persist through the rest of this quarter. The cyclical rebound in electronics demand helped productivity grow at its fastest pace in 5 years in 4Q 2016, despite sluggish machinery investment. But net investment commitments rebounded in 4Q 2016, auguring well for machinery investment by 2Q 2017. Construction contract awards (a 1-year leading indicator of construction activity) have been strong for the past 5 months, suggesting a modest construction recovery too in 2H 2017.While the services sector remains soft (hurt especially by the sluggishness in financial and business services), the cyclical manufacturing sector is in rude health: January's exports were robust despite the CNY impact (given that CNY was in January this year, but in February last year). There is scant need for additional fiscal stimulus in the year ahead, given these tailwinds. However, with property prices down only 11.3% from their 2013 peak, we expect the property curbs to remain, and the zero-appreciation policy for the S$NEER to be maintained.     

Cyclical Growth Momentum Restored by a Fiscal Spur Amid Receding Clouds

Asia Economist and CEO, Centennial Asia Advisors

Manu Bhaskaran

Asia Economist and CEO

<ul>
<li>
Trump stepped back from direct confrontation with China: In his phone call with Chinese President Xi, Trump acceded to China’s request to honour the longstanding “One China” policy, which he had appeared to question in his tweets. But the potential downside risks in the bilateral relationship were made clear by reports of an “unsafe” interaction between a Chinese surveillance plane and a US Navy P-3C Orion surveillance aircraft on the same day.</li>
<li>
North Korean missile test not a huge deal: The test…</li>
</ul>



Trump stepped back from direct confrontation with China: In his phone call with Chinese President Xi, Trump acceded to China’s request to honour the longstanding “One China” policy, which he had appeared to question in his tweets. But the potential downside risks in the bilateral relationship were made clear by reports of an “unsafe” interaction between a Chinese surveillance plane and a US Navy P-3C Orion surveillance aircraft on the same day.

North Korean missile test not a huge deal: The test…


Geopolitics: Trump Refines Approach to China

<ul><li>The CFE report outlines seven broad recommendations to chart Singapore's economic strategy for the next five to 10 years. Two key questions are raised by our assessment – what specific policy changes might emerge out of the CFE report and whether the CFE’s modest goals be achieved. On both these, we have a cautious take.</li><li>The Singapore economy is facing formidable headwinds as structural challenges mount. Without a fundamental rethink of our economic model, it will be a struggle for the economy to reach the 2-3% growth target, especially with tepid productivity growth and an ageing workforce.</li><li>The CFE's recommendation to maintain a robust manufacturing base consisting of 20% of GDP is admirable but without sufficient under-girders. We have not developed a strong core of local SMEs, a la the German Mittelstand, and remain heavily dependent on MNC-led growth. One concern is that in pursuit of this 20% goal, the Singapore Government may ramp up the sweeteners - incentives, tax breaks, etc - to attract MNCs to remain in or come to Singapore, potentially skewing the cost-benefit analysis against Singapore's favour.</li><li>Finally, overarching concerns remain unaddressed. Singapore's high cost structure is inhibiting entrepreneurship and the growth of SMEs. The local bourse is lacklustre after the penny stock crash in late 2013. Without a vibrant equity market offering an exit strategy, VCs and PE firms will be reluctant to provide the smart and patient capital that the CFE report sets out to attract. Fiscal and social policies are also in need of a deep rethink as Singapore sails into a more challenging global environment.</li></ul>

The CFE report outlines seven broad recommendations to chart Singapore's economic strategy for the next five to 10 years. Two key questions are raised by our assessment – what specific policy changes might emerge out of the CFE report and whether the CFE’s modest goals be achieved. On both these, we have a cautious take.The Singapore economy is facing formidable headwinds as structural challenges mount. Without a fundamental rethink of our economic model, it will be a struggle for the economy to reach the 2-3% growth target, especially with tepid productivity growth and an ageing workforce.The CFE's recommendation to maintain a robust manufacturing base consisting of 20% of GDP is admirable but without sufficient under-girders. We have not developed a strong core of local SMEs, a la the German Mittelstand, and remain heavily dependent on MNC-led growth. One concern is that in pursuit of this 20% goal, the Singapore Government may ramp up the sweeteners - incentives, tax breaks, etc - to attract MNCs to remain in or come to Singapore, potentially skewing the cost-benefit analysis against Singapore's favour.Finally, overarching concerns remain unaddressed. Singapore's high cost structure is inhibiting entrepreneurship and the growth of SMEs. The local bourse is lacklustre after the penny stock crash in late 2013. Without a vibrant equity market offering an exit strategy, VCs and PE firms will be reluctant to provide the smart and patient capital that the CFE report sets out to attract. Fiscal and social policies are also in need of a deep rethink as Singapore sails into a more challenging global environment.

Singapore's Committee for the Future Economy Report Abjures Bold Moves

Investing in high growth Asian frontier economies., Asia Frontier Capital

Scott Osheroff

Investing in high growth Asian frontier economies.

Asia Frontier Capital

Asia Frontier Capital Ltd. is a pioneering fund management company based in Hong Kong that specializes in investing in high growth Asian frontier economies by managing the AFC Asia Frontier Fund , AFC Iraq Fund and the AFC Vietnam Fund.

The AFC Asia Frontier Fund invests in public equities of Asian frontier countries that are seeing increasing consumption due to favorable demographic trends, rising incomes and high GDP growth. The fund invests in listed equities of companies that have their principal business activities in Bangladesh, Bhutan, Cambodia, Iraq, Laos, Maldives, Mongolia, Myanmar (Burma), Nepal, Pakistan, Papua New Guinea, Sri Lanka and Vietnam. The AFC Asia Frontier Fund is positioned to take advantage of the continuing economic shifts in these countries and offers high returns combined with significant diversification opportunities. This fund is directed by the founder and CEO of Asia Frontier Capital, Thomas Hugger, who has been investing in frontier markets across Asia and Africa for more than 20 years.

The AFC Iraq Fund was launched on the 26th June 2015 and aims to achieve long-term capital appreciation for investors by capturing value and growth potential in the post conflict high-growth & resource rich Iraq market. The fund emphasises long term investment horizon to truly capture the opportunity in Iraq. The fund's investable universe consists of locally listed companies that have their principal business activities in Iraq as well as foreign listed companies that have the majority of the business in Iraq as a whole including the prosperous Kurdish Region of Iraq (KRI). The AFC Iraq Fund offers access to investments in post conflict recovery potential of Iraq, including the KRI, and/or stability in its territory. The AFC Iraq Fund is managed by Asia Frontier Capital (Iraq) Limited, Cayman Islands under the executive leadership team of Thomas Hugger (CEO & Fund Manager) and Ahmed Tabaqchali (CIO) who have more than 47 years of investment experience as well as an extensive background covering global, emerging, frontier and MENA markets.

The AFC Vietnam Fund invests exclusively in listed Vietnamese equities to capture value in growth companies with a focus on the small to medium size companies. This market segment offers a unique investment opportunity as the valuation gap between large- and small-cap stocks in Vietnam is presently much wider than in comparable neighboring markets and the valuations are significantly depressed versus their regional peers. The fund adopts a fundamental-quantitative approach and employs an in-house earnings model to identify attractive companies where we see high growth opportunities. In conjunction with targeting the maximum upside potential the portfolio has been structured to mitigate corporate government and liquidity risks. The fund invests in a diversified portfolio of 70-90 attractively valued companies to carefully control concentration risk.  This approach allows the fund to sell, or buy, positions without having a significant market impact. The fund is directed under the executive leadership of Thomas Hugger and Andreas Vogelsanger who have more than 50 years combined experience managing investments in frontier markets, Asia and around the world.

For more information about the fund, management team and investment strategy please contact us at info@asiafrontiercapital.com.

Thematic (Sector/Industry)

In line with our process of being on the ground in the countries we invest in, Scott Osheroff, Analyst at Asia Frontier Capital, travelled to Myanmar and conducted meetings with portfolio companies and other companies on our shortlist. The photos in this article are all by AFC.

In line with our process of being on the ground in the countries we invest in, Scott Osheroff, Analyst at Asia Frontier Capital, travelled to Myanmar and conducted meetings with portfolio companies and other companies on our shortlist. The photos in this article are all by AFC.

United States

iShares MSCI Singapore ETF is an exchange-traded fund incorporated in the USA. The ETF's objective seeks to provide investment results that correspond to the performance of the Singaporean market, as measured by the MSCI Singapore 25/50 Index. The ETF invests in a representative sample of index stocks using a "portfolio sampling" technique. SGX Trading Name: IS MSCI SIN 100US$

iShares MSCI Singapore ETF (EWS US)

Singapore: Policy Burden Shifts from Monetary to Fiscal

Singapore’s economy grew robustly in 4Q16, powered by a strong export rebound but construction contracted and services eked out a tiny expansion....

Jason Tan

Cyclical Growth Momentum Restored by a Fiscal Spur Amid Receding Clouds

The cyclical clouds have all cleared, and Singapore will return to 3% real GDP growth in 2017, constrained only by the slow growth in net...

Prasenjit K. Basu

Geopolitics: Trump Refines Approach to China

Trump stepped back from direct confrontation with China: In his phone call with Chinese President Xi, Trump acceded to China’s request to honour...

Manu Bhaskaran

Singapore's Committee for the Future Economy Report Abjures Bold Moves

The CFE report outlines seven broad recommendations to chart Singapore's economic strategy for the next five to 10 years. Two key questions are...

Manu Bhaskaran

Myanmar Travel Report

In line with our process of being on the ground in the countries we invest in, Scott Osheroff, Analyst at Asia Frontier Capital, travelled to...

Asia Frontier Capital