September 5, 2016

Someone commented to me that I should not have been overly alarmed at the estimated 20% loss we wrote about 2 weeks back on a certain bond portfolio of local Singapore corporate bonds bought 2 years ago because the STI is down about the same for that period unlike the S&P 500, flying at all time records and for what it is worth, the Shanghai Composite is still 33% higher than where it was 2 years ago.

Shamefaced that I had not realised that the STI had underperformed the field, the homework had to be done to recalibrate that personal investment antenna and here is the chart that shows it.


In table format.


There is no doubt that Singapore’s STI has underperformed the entire region, including embattled Malaysia, for the 2 year period that has led to this.

The testimony to that would be the sorry news from AsiaOne that “Not a single firm from Singapore has made it onto Forbes Asia’s 2016 Fabulous 50, which was again dominated by Chinese companies for the sixth consecutive year.


The 2016 list 


Ironically, Philippines, at about 60% of STI’s market cap, is more than well represented on the list and Vietnam managed to make their first break through in the 12 years of Fab 50, with Vietnam Dairy Products being featured.

Singaporeans must and should rightly  blame the methodology used because Olam was once a regular on the list and we had Avago Technologies and CWT right up there last year and Olam must have fallen off because companies with more than 50% state-ownership are excluded in order “to highlight entrepreneurial outfits, not ones living off government connections”.

Private companies are also excluded from the starting pool of 1,524 public companies that have at least $1.7 bio in annual revenue besides being profitable with higher revenues than 5 years ago. Highly leveraged companies with debt ratios of more than 50% are also culled along with subsidiaries of listed parents.

Knowing Singapore which is the sort of country to climb from one of the unhappiest (Happy Planet Index 2012 and Gallup Poll of Negative Emotions 2011) to one of the happiest country in the world or rather, Asia in 2015 (World Happiness Report) because Singaporeans are very good at passing exams, I would hazard to guess, I wonder why not dominate the Fab50 as a challenge for the past 12 years? [PS: Singapore is no longer on the Happy Planet survey]

For the Complain-and-Blame Society that is obsessed with catching the best pokemon right now, I decided to come up with the excuses for the Fab 50 absence during SG51 after featuring at least a name or two in the years before. My friends were happy to supply the answers for their years of business consulting experience at those BGC and McKinsey outfits.

1. Small markets think small because it is impossible to drum up $1.7 bio in annual revenue in a country of just 5 million residents and all the Grab’s and SGCARMART’s are just hoping for the first mover advantage to be acquired eventually by some real “unicorn”.
The growth story is happening in Indonesia, Philippines, Thailand and, to a certain extent, Malaysia.

2. The Singapore market is very much like the region’s where family owned businesses dominate the stock market. Singapore has the double whammy of family owned that takes up 50% of listed companies and government linked that takes up nearly half the market cap of the STI Index.

3. There are more firms trying to delist than IPO in Singapore with the step up of corporate governance after some price rigging scandals and trading volumes have been affected.

The burning question all the venture capitalists and experts get posed by the authorities is, why has Singapore not produced that billion dollar start up for all the easy funding, government agency initiatives and start up boot camps?

We definitely had some in the past.

Creative Technology was a SGD 4 bio company in its hey-days when it took on the world with their sound cards and would have been a worthy mention in the FAB50 list had it existed then. That was real technology and not “hungrygowhere” technology. Whittled down to SGD 80 mio market cap now? (I will be writing about this soon)


We also have Razer the gaming equipment company, founded by Singaporean Tan Min-Liang and now based in the US (and still private) and Hyflux, a SGD 2 bio market cap darling just a few years back.

Singapore now boasts to have South-east Asia’s most valuable startup Garena that is running towards a US IPO with the possibility of a dual listing (on SGX of course), given the founder’s Singapore roots.

Not left behind in the drone game, Singapore can also boast of Garuda Robotics, that may be our front line defence against Zika mosquitoes soon.

We also have SwarmX, that has just relocated to the US, founded by NTU drop-out, Pulkit Jaiswal (former Garuda Robotics), that has earned the attention of the big names of tech.

But … But … But …

These are all the private companies that may never be listed here.

For all the Hungrygowhere’s that Singaporeans are proud of, Asean’s Top 8 Biggest Internet Companies are mostly from… MALAYSIA?

And to my horror, I went on to discover that Temasek funded GrabTaxi was conceived in Malaysia by the scion of the Tan Chong family.

Singapore is a really safe and efficient place to do business and kids do not lie when you ask them why Singapore has not produced a FAB-type company, as I found out when I asked a good friend’s son. The answer from the teen was that there is no urge to do anything of grand scale or high risk because life is comfortable as it is. This will be delivered to us in the vision for the future for a Smart Nation, a long term investment into a “smart city” with enviable technology.

Necessity Is The Mother Of Invention and when things are taken care of, too well, for them, there is little need to rock the boat. The system is not equipped to produce the blackjack champions, world class deejays or astronauts albeit the Olympic swimming champion who had help from his parents.

This is not necessarily a bad thing for Singapore continues to be the capital provider and safe financial centre with the environment for the entrepreneurs to do business in.

No one knows this better than my dear friend who had some big dreams for her website before she gave up the idea or another friend’s wife who had to go to Taiwan to get her No.2 chart hit single released because Singapore producers did not think a mother of 2 would be able to pull it off.

It is not FAB50 but it is definitely SAFE, thanks to all that homework to explain that 20% drop in the STI.