Published December 3, 2008

S'pore market pulls in US investors as crisis deepens

Q3 saw net US$543m of S'pore stocks bought, reversing net sale in Q2

By CHUANG PECK MING

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AS the financial crisis deepens at its epicentre in the US in the third quarter, investors there - those still with cash to spare - appear to have taken cover in some selective markets abroad, including Singapore.

The latest figures released by the US Treasury show that US investors snapped up a net US$543 million worth of stocks listed on the Singapore Exchange (SGX) in the July-September quarter (Q3), reversing a net sale of US$897 million in Q2 and US$960 million in Q1.

US investors had sold a net US$347 million of their Singapore holdings in August, but made a net purchase of US$1.44 billion in stocks in July, which helped made them a net buyer of Singapore stocks in Q3.

SGX stocks were one of the biggest purchases made by US investors during the quarter, even when they were unloading their global stock holdings, including those from Asia, as the financial crunch spread.

Only in Brazil (purchases of US$4.36 billion), Spain (US$1.13 billion), Ireland (US$886 million) and Argentina (US$704 million) did US investors spent more on stocks, outside the tax-haven Caribbean region.

Within Asia, apart from Singapore, US investors were net buyers only in the Chinese (US$250 million), Indonesian (US$11 million) and Thai (US$89 million) stock markets.

Analysts offered one possible explanation for why US investors were buying in these markets when they were selling everywhere: these markets offered better bargains as prices fell.

Stock prices plunged by almost 20 per cent quarter-on-quarter in Q3 in Singapore, 22.39 per cent in Thailand and 21.99 per cent in Indonesia. They dropped 16.7 per cent in China.

But while stock prices in Singapore, Thailand and Indonesia fell more than in markets such as South Korea (-13.54 per cent) and Japan (-16.48 per cent), where US investors dumped US$3.53 billion and US$10.22 billion worth of stocks respectively, they fell no greater than in other major Asian markets.

Prices in the Hong Kong stock market tumbled 18.9 per cent, while those in Taiwan went down by 23.98 per cent. And US investors disposed of a net US$8.59 billion of stocks in Hong Kong, and US$881 million in Taiwan.

Another explanation is that US investors are more upbeat on the long-term prospects of China, Singapore, Indonesia and Thailand.

Still, when Lehman Brothers sank in September, leading to the massive sell-off on Wall Street which wiped out 25 per cent of the value of US stocks in the first two weeks of October, US investors were ready to abandon the Singapore market. That month, they sold a net US$553 million of SGX-listed stocks.

On the whole, US investors off- loaded a net US$24.48 billion worth of stocks in Asia in Q3, with Japan accounting for 41.7 per cent of the total sales. These followed net sales of US$5.72 billion in Q2 and US$3.52 billion in Q1.

Worldwide, excluding the US, US investors posted net stock sales of US$17.91 billion in Q3, after mopping up a net US$16.78 billion in Q2.

By region, only in the Caribbean and Latin America were US investors net buyers of stocks in Q3, picking up US$21.85 billion and US$4.55 billion respectively.