Money and Me: Where is the value in Singapore’s Next 50 stocks after the rally?

SPEAKER_1 (0:01)

Best of Live Well, featuring Lance Alexander.

It's not just about money, it's about you. Money and me, where wealth meets self-awareness. Only on Money FM 89.3.

Lance Alexander (0:19)

That's right, it's Money And Me time. Singapore's stock market offers more than just banks and familiar blue chips. Beyond the biggest companies are businesses involved in semiconductor equipment, engineering, financial services and transport. The iEdge Singapore Next 50 Index brings together 50 companies beyond Singapore's 30 largest listed firms. It gives investors a starting point for exploring this part of the market, but the question remains, which shares are worth looking into, and where are the opportunities?

On Money And Me, James Ong, Group Head of Asset Management at CGS International, joins me on Money FM 89.3. James, welcome to the show. Good morning to you.

James Ong (1:07)

Morning to you, Lance.

Lance Alexander (1:08)

Now, the iEdge Singapore Next 50 Index, it tracks the performance of the next 50 largest SGX listed companies outside the STI.

These are typically mid-cap emerging leaders. The question remains, how good is this potential growth?

James Ong (1:28)

Right. Can I just start with a number that surprised me?

Lance Alexander (1:31)

Okay.

James Ong (1:31)

The non-oil exports grew about 46% in August this year, taking a week, months, say one year back, right, taking with a pinch of salt for a single month. But the last eight months, we actually seen the non-oil exports have grown 22%.

And that is the highest growth since 1980s. Now, so the enterprise Singapore has put it down that this export has been growing 12 months in a row and put it as an AI-related demand. Now, if you own the index most Singaporeans own, you own almost none of them. Because STI index is 30 companies, and most of it actually skewed to the three banks, and technology is less than 1% in the index.

Lance Alexander (2:18)

And if you look at the next 50, a lot of them are tech stocks.

James Ong (2:21)

In the next 50, we actually will see at least 10% in that space. But I think where I would like to answer your question is actually where the market, the forces has pulled this thing apart. So, number one is AI-related demand. So, when we talk about AI, it's not talking about the theme, but the physical demand. The supply chain flowing through Singapore.

And that actually is a very, very impressive number that we have been driving. ADB has also shown that 9 out of 15 largest semiconductors are actually held in Singapore. And Singapore actually sits on one fifth of the cheap making equipments for the world. So, this actually, this sector is a 6%, but yet there is none much to be seen in STI, right? And the second sector that actually grows this place is construction. Now, this is something that we all can see.

BCA actually shown that about $50 billion demand this year and about the same amount last year. We can see the Changi Terminal 5, we can see Tuas Port, we can see real extensions, new hospitals, et cetera. So, these companies were actually, before they hit the developers, they were hit in the materials company, the engineering firms, the maintenance companies. So, all these are actually are swinging the growth of these sectors up.

Now, the one that is pulling them a little bit challenge is always interest rates. Interest rates will actually hit those companies that actually borrows against assets. High interest rates will actually take a toll on them. So, I think this is where the market is pulling, on two side is pulling up and one side is pulling it down.

Lance Alexander (3:57)

Okay. Now, you mentioned construction and tech. So, they make up maybe a third or a quarter of the next 50 What are the other sectors?

James Ong (4:08)

Oh, okay. So, not so much of that amount. So, tech and healthcare is about 20% and then we look at materials about another 8-9% and there's actually a big sector that's sitting here that is a REIT and a property sector that's sitting about 30%. So, we actually can see the index being how Singapore is constructed as a little bit of barbell of growth and stability being the segment of REITs.

Lance Alexander (4:37)

A lot of people are also concerned, yes, there's potential, but it could be a bit volatile as well. Mentioning AI stocks, yes, it's great, but will the bubble burst? If it does, then what then? So maybe we can spend some time talking about the Next 50 and the volatility associated with these companies too.

James Ong (4:57)

I think that's a very, very good point, right? A lot of people are looking, when they look at the Next 50, maybe a step back. Before the IH launched this index, actually there is no one way to buy the 50 companies. So people have to do their own research and they look at which 50 companies they tend to be wanting to buy.