An aerial view of Singapore’s skyline.
When Anton Ludenklau, a KPMG executive, transitioned from a quiet town near London to the bustling cityscape of Singapore, he quickly noticed how business-friendly the environment is in this Southeast Asian nation.
“There’s a real focus on building relationships here,” he remarked during a phone interview with CNBC.
Mr. Ludenklau took on a leadership role at KPMG’s financial services advisory practice in January 2021. He expressed that upon arrival, it became clear that the government operates with a mindset geared toward nation-building, which presents significant potential.
Although he finds Singapore itself not particularly compelling as a market due to its small population, he emphasized that investors appreciate its strategic location, adherence to British common law, and a robust private capital market. In his view, Singapore serves as a “hub” facilitating capital movement throughout Asia.
According to the World Bank, the country, known to be one of the most expensive globally, is seen as a sanctuary for many foreign investors.
“Reliability plays a crucial role in attracting these investors,” Jeff Howie, a market strategist at SGX Group, explained via email to CNBC. He mentioned that the country maintains policy stability, solid institutions, and strong trade and financial connections, which are increasingly regarded as fundamental components.
Recently, the Singapore dollar reached its highest exchange rate against the US dollar since October 2014, trading around 1.26 as of Wednesday.
Reflecting on his five years in Singapore, Ludenklau has observed the nation evolve from a “little red dot,” a term of endearment for its map size, into something significantly more. He quoted Canadian Prime Minister Mark Carney, suggesting the country is “closer to becoming a globally significant middle power.”
Access to emerging markets
Tian Ong Foo, the Regional Head of Private Banking at Standard Chartered, shared in an email that Singapore acts as a “strategic hub” for investments in nearby markets like Indonesia, Malaysia, and Thailand, allowing investors to navigate these areas without the associated operational and regulatory challenges.
He noted that Singapore has lower geopolitical risks, more transparent regulations, and a well-developed financial ecosystem compared to other hubs.
Srini Nagarajan, managing director and head of Asia at British International Investment (BII), affirmed that Singapore provides an optimal location for investing in emerging economies within the region.
A solar power plant in Tay Ninh province, Vietnam. The Central Bank of Singapore is backing bioenergy and solar projects in Southeast Asia through its Green Investment Partnership.
Nagarajan’s focus is on climate finance, and BII, which concentrates on the Philippines, Vietnam, and Indonesia, aims to invest about 500 million pounds (around $685 million) in green projects by the end of the year. He observed, “These markets present the best chance to reduce carbon emissions significantly in the short term.”
In October, BII pledged $60 million to the Green Investment Partnership, an initiative by Singapore’s central bank to fund projects like bioenergy and solar energy.
A shelter?
Morgan Stanley described Singapore as an “illiquid safe haven” in its past research notes. However, the bank suggested new policies aimed at rejuvenating the stock market could change this outlook. They mentioned that the Monetary Authority of Singapore has made an unprecedented investment of $4 billion to enhance liquidity for smaller and mid-cap stocks.
Morgan Stanley estimated that the MSCI Singapore Index may see its value double between 2025 and 2030, marking the beginning of a “new era of wealth creation” for the country.
Sixty years after achieving independence, Singapore is evolving from a safe space for global capital to a key player in innovation and influence, the report indicated.
Howie added that Singapore offers more than mere safety, suggesting it provides a stable economic base that is conducive to value-oriented investing. But Ludenklau acknowledged that the country remains a haven for certain investors, especially families with wealth.
Another reason investors feel drawn to Singapore is its relatively low rates of fraud and financial crimes compared to many neighboring nations. Recently, Singapore was ranked 10th in a global fraud index for its fraud prevention capabilities.
Where to invest
Howie highlighted the stock market’s attractiveness, noting, “The market just had its strongest rally in 20 years, driven more by profits than speculation.” The Straits Times Index saw a roughly 29% increase in the year leading up to January 28, thanks to strong performances from banks, industrial sectors, infrastructure, and community-focused companies.
Kelvin Tan, founder and CEO of Straits42 Group, pointed out that residential real estate is particularly appealing to U.S. investors since such properties are exempt from the Additional Buyer Stamp Duty (ABSD), which is a hefty tax imposed on most foreign buyers.
A high-rise apartment complex in Singapore. While most foreign buyers face a 60% stamp duty, those from the U.S. and a few European countries are exempt.
Disadvantages
For those seeking high-risk, high-return opportunities, Singapore might not be the ideal choice. Some critics have even labeled the market as “boring.”
Howie suggested this perception could stem from low returns and the absence of captivating stories. However, he believes it might be more accurately viewed as a place for confident investments. As investors increasingly prioritize resilience and governance, Singapore’s reputation may in fact work in its favor.
“Investors appreciate predictability,” Ludenklau noted, adding that Singapore offers just that.
