Planned ‘value unlock’ strategy to lift returns and ratings

The strategy to be soon revealed is expected to bolster the attractiveness of asset markets.

Singapore’s “value unlock” package that aims to boost interest in the stock market is seen to lift returns and ratings for Singaporean companies.

“We forecast market-wide return-on-equity to rise from 12-14%, lifting price-to-book ratio multiples to 2.3x,” Morgan Stanley said in a new analysis.

Singapore has earlier announced plans to fuel demand for SGX-listed stocks via $5b from the Monetary Authority of Singapore. This will be invested with several fund managers with a focus on improving small and mid-cap liquidity in Singapore.

Of this amount, $1.1b has already been assigned. This is coupled with incentives to set up asset management businesses in Singapore and support equity research., whilst work is ongoing to streamline regulations and attract new listings.

“Measures to 'unlock value' in listed companies build on the experience of various Singapore large caps, such as DBS, CapitaLand Investment and Singtel. There have also been moves to restructure Keppel and Seatrium,” Morgan Stanley noted.

The company expects the SGX to be the main beneficiary as volumes rise. Other large-cap beneficiaries from the lower cost of equity include CLI, KEP, ST and STE.

From a macro perspective, Morgan Stanley sees the ongoing reforms to help reinforce the attractiveness of Singapore’s asset markets as the diversification away from the USD debate continues and as cyclical growth concerns recede.

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