In 2023, the Straits Times Index (STI) remained flat, but showed a 4% increase when dividends are included. It was another uneventful year for Singapore stocks, lacking the exhilarating returns of the US market, where the S&P 500 rallied by 26%, yet avoiding the downturn seen in the Hang Seng Index, which dropped by 13%. The STI maintained its typical defensive posture.
However, it’s important to note that the STI, comprising just 30 stocks, represents only a portion of the entire Singapore stock market. These major companies don’t necessarily reflect the overall market performance, which was not entirely flat. In this post, I will unveil some of the top movers, both gainers and losers, in the Singapore stock market during 2023.
Best and Worst Performers in STI in 2023
Let’s begin with the STI. The top performers were Sembcorp Industries and Keppel Corp, each gaining 61%. This exceptional performance was likely driven by the divestment of their oil and gas units to Seatrium. Their financial numbers improved significantly after shedding the burdensome oil and gas segments, and their focus on clean energy aligns well with the current drive to address climate change. However, this demerger provided only a temporary boost to their share prices; future performance will depend on the growth of their existing business units.
On the other end of the spectrum, the worst performers in the STI were Thai Beverage and Hongkong Land. Both companies primarily generate revenue in Thailand and Hong Kong, respectively, and the stock markets in these regions fared poorly. Besides the HSI being down by 13%, the SET Index also declined by 15%. These regional market downturns weighed heavily on these stocks, despite their listings on the SGX.
Among the Singapore banks, OCBC was the top performer with a 14% return, while UOB lagged, losing 2%. DBS fell in between, achieving a 6% gain.
Top 10 Performers in STI (2023)
It’s not surprising to find lesser-known names among the top 10 performers. This is typical, as smaller-cap stocks often experience extreme returns, both positive and negative. You’ll notice that the subsequent list of the worst 10 performers is similarly dominated by small caps.
In 2023, most of the top 10 performers saw their values more than double, a stark contrast to the flat return of the STI overall.
These top performers were predominantly from industries like construction and tourism, both of which benefited from the post-Covid recovery. Construction activities picked up pace to make up for lost time, while increased travel led to a surge in demand, boosting related companies.
Key standouts in construction included Green Build Technology, Ley Choon, and Ever Glory United, with gains of 188%, 147%, and 105%, respectively. In the leisure sector, theme park operator Sims Leisure saw a rise of 111%. Notably, even Singapore Airlines (SIA) enjoyed a 25% increase, ranking as the third-best performer among STI stocks. Amara, part of the hospitality sector, not only benefited from the travel rebound but also received an additional boost from a delisting offer of $0.60 by its management.
Worst 10 Performers of the STI (2023)
The spotlight among the worst 10 performers falls predominantly on the REITs, with two notable examples being Dasin Retail Trust and Manulife US REIT, both of which made it to the list.
Dasin Retail Trust, which owns a portfolio of malls in China, suffered significantly due to the Covid-19 lockdowns and has not recovered since. The trust experienced a decline in revenue and faced challenges in loan repayments, eventually defaulting on its loans.
Manulife US REIT was similarly impacted by the pandemic, but in a different way. The accelerated shift to work-from-home arrangements led to many US employees not returning to the office even after the situation normalized. This change resulted in reduced demand for office spaces, causing a drop in the valuation of Manulife US REIT’s office properties. Consequently, the gearing ratio spiked to over 50%, triggering loan covenants and preventing the REIT from distributing dividends.
EC World REIT also merits a mention as a potential candidate for this list. It too is grappling with debt repayment issues. However, its trading has been suspended for several months, and I believe that its share price is likely to plummet once trading resumes, if it ever does.
A Muted Year For Singapore REITs
The continued interest rate hikes significantly impacted REITs in 2023. These higher rates led to increased financing charges, and the fact that only 3 out of over 40 REITs reported higher dividends in the third quarter is a clear indicator of this impact.
Additionally, in 2023, we saw Treasury Bills rise beyond 4%, making fixed deposit rates increasingly attractive. This shift may have led investors to reconsider the risks associated with REITs, resulting in reduced demand and weaker share prices.
However, with an anticipated interest rate cut in 2024, REITs rallied strongly in the last two months of 2023. The iEdge S-REIT Index, after reaching its lowest point in October, closed the year flat.
Despite the challenging environment, about half of the REITs managed to eke out a positive return in 2023. Digital Core REIT was the top performer, gaining 26% as it recovered from a bankruptcy issue with one of its tenants.
REITs backed by strong sponsors such as Mapletree, CapitaLand, and Frasers mostly saw gains in 2023. This underscores the importance of quality in REITs, especially during tough times, as they tend to demonstrate more resilience in their performance.
A Better 2024!
The Singapore market experienced a lackluster year in 2023, but it wasn’t without its winners, particularly in the construction and tourism-related sectors. Even in challenging times, there are always pockets of opportunity. Of course, investing is generally easier when the overall market sentiment is bullish. Here’s hoping that 2024 will be a more prosperous year for Singapore stocks!
Thank you for the excellent review. Much appreciated.