Singapore equity market has fallen sharply
in 2008
The global financial crisis in 2007 and 2008 led to sharp falls in equity markets worldwide. In Singapore, the FTSE-ST
Index (formerly known as Straits Times Index) (“FSSTI”) fell 62%1 from its peak in 11 October 2007 to the recent trough in
9 March 2009.
This fall is comparable to the 62%2 decline seen during the Asian Financial Crisis of 1997 and the 52%3 decline which
followed the bursting of the Dotcom Bubble in 2000.
VValuations in Singapore equity market have
reached historically low levels
The Price-to-Earnings (“PE”) ratio is the price paid for a share
relative to the annual earnings per share of a company, and is
a measure of how expensive a share is.
At the start of 2009, the historical PE ratio of the FSSTI,
measured using historical earnings, was 6.2x4, which is lower
than the lowest PE ratio during the Asian Financial Crisis
of 11.0x4. This is the first time in the last 15 years that the
historical PE ratio is at single-digit level.
The forward PE ratio of the FSSTI, measured using forecasted
earnings, was 11.0x4 at the start of 2009, which is comparable
to 10.7x4 at the worst point of the Asian Financial Crisis.
FSSTI 12-Month Forward Price-Earnings Ratio Source: Citi Investment Research, November 2008
Singapore’s stable fundamentals should ride out
the financial turmoil
Valuations at these levels imply that the Singapore equity
market has already priced in a deep recession and a sharp fall
in corporate earnings. A further sustained fall in equity prices
would occur if the market comes to the view that we are
headed for a prolonged slump similar to the Great Depression
of the 1930s.
However, we see only a small likelihood of the latter occurring
because we believe that Singapore’s fundamentals are stable
and the government is in a position to stimulate the economy
if required5.
Financials and Properties will likely be the key
sectors within Singapore to stage a faster recovery
lead market rebounds from troughs of the FSSTI, as was the
case during the recessions of 1999, 2002 and 20036.
Infrastructure spending in both private and public projects
is likely to play significant roles in Singapore’s economic
recovery, such as the record high of S$18 billion to S$20
billion7 of public spending on infrastructure in 2009. As a
result, transport players, construction/infrastructure players
as well as banks are likely to benefit from increased
infrastructure spending.
Singapore blue chip issuers are likely to rebound
Due to the global financial crisis, Singapore blue chip issuers
have seen large price declines over the past year.
Decline between peak and trough
City Developments Ltd
77% (19 June 2007 -
9 March 2009)
Keppel Corporation Ltd
75% (17 October 2007 -
24 October 2008)
Oversea-Chinese Banking
Corporation Ltd
59% (23 May 2007 -
9 March 2009)
SembCorp Industries Ltd
73% (2 October 2007 -
24 October 2008)
Source: Bloomberg, 15 April 2009
In tough times, investor sentiment may be consumed by fear
and uncertainty with the equity markets. But if viewed from
a different angle, such attractive valuations could signal the
potential buying opportunities in the Singapore equity market
to position for the market’s recovery from the crisis.
Blue chip companies and issuers have been tested and have
proven themselves over time. They have survived downturns
in the past and, in many instances, have emerged stronger.
Invest in Singapore’s recovery potential via the
blue chip leaders
The United Singapore Recovery Fund (the “Fund”) aims to invest
in Singapore blue chip issuers, which are, in the Managers’
view, leaders in their respective sectors and industries, and
whose securities are undervalued as a result of the current
economic climate.
These issuers typically have strong records of profit growth
and/or dividend payment, reputations for quality management,
products and services, and strong balance sheets. Such
qualities would enable them to consolidate and grow market
share even as their competition is constrained by the current
economic downturn. And when the economy recovers, these
issuers and their shareholders are likely to be rewarded.
Companies and issuers that the Fund is currently invested
in are:
Ascendas Real Estate Investment Trust
SembCorp Industries Ltd
CapitaLand Ltd
Singapore Airlines Ltd
City Developments Ltd
Singapore Press Holdings Ltd
DBS Group Holdings Ltd
Singapore Technologies Engineering Ltd
Keppel Corporation Ltd
Singapore Telecommunications Ltd
Oversea-Chinese Banking Corporation Ltd
United Overseas Bank Ltd
While it is the intention of the
Managers that the portfolio of the
Fund will remain generally fixed
for the duration of the Fund, the
Managers may buy securities for
or sell the securities of the Fund in
certain circumstances, which are
described in the Fund’s prospectus.
Peace of mind with a buy-and-hold investment
approach
The Fund aims to buy and hold a generally fixed, diversified
portfolio8 of between 12 - 15 blue chip issuers for a fixed
investment term of two years from the Fund’s inception on
16 March 2009. This buy-and-hold approach maintains that
it is potentially better to purchase a well-chosen portfolio
and hold it for a period of time, rather than to try and
“time the market”.
This approach requires an investor to have patience and
discipline rather than look for short-term performance.
This approach has the potential to reward investors over
the defined term of the Fund, while allowing them to be less
concerned about the day-to-day fluctuations of the market.
On or around the first anniversary of the Fund’s inception on
16 March 2009, the Managers will perform a review of the
Fund’s portfolio and may rebalance and adjust the portfolio
to take into account of any new investment opportunity or
outlook. Also, as the Fund will not be buying or selling stocks
on an active basis, savings from fewer transaction costs will go
directly to the Fund.
Enjoy potential semi-annual distributions9
The Fund aims to offer investors a potential distribution9 of 2.5% p.a. of the Initial Issue Price per Unit, to be paid
semi-annually.
Proven Performance, Year After Year10
UOB Asset Management Ltd (UOBAM) is one of Singapore’s
most awarded fund managers10. It has received awards for
investments in local, regional and global markets, across global
sectors such as banking and finance, technology, healthcare
as well as gold and mining.
To invest in the recovery potential of the Singapore
equity markets, please speak to a UOB Personal Banker.
At UOBAM, we go to great lengths to bring you greater
investments.
Fund Details:
Fund Name
United Singapore Recovery Fund
Managers
UOB Asset Management Ltd
Investment Objective
To achieve capital appreciation and
to make regular distributions through
investment in a generally fixed, diversified
portfolio8 of equity or equity linked
securities which are listed or quoted
on the Singapore Exchange Securities
Trading Limited (“SGX-ST”). There will be
no specific industry or sector emphasis.
Fund Currency
SGD (with USD pricing)
Maturity
16 March 2011
Offer Period at
Prevailing NAV (Net
Asset Value) Pricing
20 April 2009 - 29 May 2009
Subscription Mode
Cash (SGD and USD), SRS (SGD)
Subscription Fee
3%
Management Fee
0.5% p.a.
Other Fees
Custodian, Registrar, Trustee, Valuation
and other fees apply
Minimum Initial Subscription
S$5,000
Dealing Frequency
Every Business Day on Forward Pricing
up till 3 pm (Singapore time)
Notes:
1) Source: Bloomberg, 14 April 2009, in SGD terms
2) Source: Bloomberg, 5 January 2009. Period from
17 February 1997 to 4 September 1998 in SGD terms
3) Source: Bloomberg, 5 January 2009. Period from
3 January 2000 to 21 September 2001 in SGD terms
4) Source: Citi Investment Research, 2 January 2009
5) Source: Straits Times, 19 January 2009
6) Source: Citi Investment Research estimates,
December 2008
7) Source : Straits Times, 26 March 2009
8) While it is the intention of the Managers that the portfolio
of the Fund will remain generally fixed for the duration of the
Fund, the Managers may buy securities for or sell the securities
of the Fund in certain circumstances, which are described in
the Fund’s prospectus.
9) Investors should note that the intention of the Managers
to make such distributions is not guaranteed and there is no
assurance that any distribution or distribution level will be met.
The making of any distribution shall not be taken to imply that
further distributions will be made and the Managers reserve the
right to vary the frequency and/or amount of the distributions.
Distributions from the Fund may be made out of Net Income
and/or (in the event that Net Income is insufficient) out of the
capital of the Fund. Investors should note that any distributions
made (whether out of capital or otherwise) may have the effect
of lowering the net asset value of the Fund. Where distributions
are to be made out of the capital of the Fund, investors will
be notified accordingly of the proportion of the distribution
which is made out of the capital of the Fund. Please refer to
prospectus for more information on distributions by the Fund.
10) Winner of the following: 2 awards at the Morningstar
Singapore Fund Awards (2008-2009), 34 awards at The Edge-
Lipper Singapore Fund Awards (2003-2009), 32 awards at
the Singapore Standard & Poor’s Investment Funds Awards
(2000-2007), 23 awards at the Singapore Investment Funds
Awards (1999-2002). 6 awards at the Singapore Fund Of The
Year Awards (1997-1998) organized by The Business Times,
Standard Chartered Bank and Reuters, 5 out of 7 awards
at the inaugural Singapore Fund Of The Year Awards 1996
organised by The Business Times, Standard Chartered Bank
and MoneyWorld Asia. Please visit uobam.com.sg for more
information.
Important Notice and Disclaimers:
The information above must not be construed as an offer or
solicitation to deal in units in the Fund (“Units”) and is strictly
for your information only. The information is based on certain
assumptions, information and conditions applicable at a
certain time and may be subject to change at any time without
notice. Past performance of the Fund or of UOB Asset
Management (“UOBAM”) is not necessarily indicative of
the future or likely performance of the Fund or of UOBAM
and any past performance, prediction, projection or
forecast on the economy, stock market, bond market or
the economic trends of the markets is not necessarily
indicative of their future or likely performance or that of
the Fund. The value of Units and the income from them, if any,
may fall as well as rise. Investments in unit trusts are subject
to risks, including the possible loss of the principal amount
invested, and are not obligations of, deposits in, or guaranteed
or insured by United Overseas Bank Limited (“UOB”), UOBAM,
or any subsidiary or associate of the UOB Group or any of
their affiliates or distributors of the Fund. No representation
or promise as to the performance of the Fund or the return
on your investment is made. There is no guarantee that the
Fund will meet its investment objectives. UOB, UOBAM or
any subsidiary or associate of the UOB Group or any of their
affiliates may have interests in the Units and may also perform
or seek to perform brokering and other investment or securitiesrelated
services for the Fund. Investors should read the Fund’s
prospectus before investing. A copy of the Fund’s prospectus
may be obtained from UOBAM or any of its appointed agents
or distributors. This document does not constitute investment
advice or a recommendation and was prepared without regard
to the specific objectives, financial situation or needs of any
particular person who may receive it. You may wish to seek
advice from a financial adviser before making a commitment to
invest in any Units, and in the event that you choose not to do
so, you should consider whether the Fund is suitable for you.
Applications for Units must be made on the application forms
accompanying the Fund’s prospectus.
UOB Asset Management Ltd Co. Reg. No.198600120Z
United Overseas Bank Ltd Co. Reg. No.193500026Z
