Singapore’s stock market is staging a strong comeback, while Taiwan remains the best performer in Asia.
The benchmark Straits Times Index ended 2020 as the worst performer in Asia, losing 11.8 percent through the year. But the STI climbed by about 12.2 percent so far this year, and has become one of the region’s top performers, CNBC reports.
The STI is a market capitalization weighted index that tracks the top 30 companies listed on the Singapore Exchange. As of Tuesday, as many as 12 of its constituent stocks have made double-digit gains this year.
Taiwan was Asia’s best-performing stock market as of Tuesday. The benchmark Taiwan Stock Exchange Capitalization Weighted Stock Index, or Taiex, slightly edged out the Singapore index with a 12.4 percent gain this year.
“Singapore is in a very good sweet spot, mainly because it’s very cyclical,” Joanne Goh, investment strategist at Singapore bank DBS, said last week.
Markets or stocks that are “cyclical” rise and fall in conjunction with fluctuations of the economy. The STI is made up of a high proportion of financial and industrial stocks typically considered as cyclical.
Unlike Singapore, Taiwan’s stock market has a “high proportion of growth stocks,” French investment bank Natixis said in a report earlier this month.
Growth stocks are those with the potential to grow quickly, and they’re often in the tech sector. Such stocks were in favor last year when the Covid-19 pandemic hit global economic activity, but many investors are now buying cyclical stocks as the economy recovers.
Still, the performance of the Taiwanese market showed that “downward pressure from high proportion of growth stocks can be partially buffered by high dividend yield, and even better if there is resilient economic growth,” said Natixis.
Taiwan was Asia’s best-performing economy in 2020, with its exports boosted by strong global semiconductor demand. The island is home to Taiwan Semiconductor Manufacturing Co, or TSMC, the world’s largest foundry.
