Bearish STI

Although the Straits Times index had gone down quite a bit, i am pretty bullish on the Singapore stock market.

Firstly, i think that Singapore is a tax heaven for investors in the United States and they might flock here to avoid heavy investing taxes in their country. US citizens are taxed for both capital gains and dividends.

Secondly, interest rates are kept low to maintain a slow and constant rate of inflation in the country. A healthy rate of inflation will boost spending in the country because cheap money can easily be available.  According to Jesse Colombo, majority of the loans in Singapore comprises of housing loans and is in a risk of a a property bubble burst in a situation of an interest rate increase. However, since the recent property cooling measures by the Monetary Authority of Singapore, property prices have said to stabilise.

Source: http://www.forbes.com/sites/jessecolombo/2014/01/13/why-singapores-economy-is-heading-for-an-iceland-style-meltdown/

Lastly, prices are low now in view of the upcoming results announcement for the various companies. Interest rates have been kept low to spur growth. Property companies have ventures out of singapore to Australia and other parts of the world as land prices soar. OCBC seek to acquire Wing Hang Bank at almost twice its book value. Low interest rates might be helping these companies to expand to greater China where more growth might be.

As the STI index hit one of the low now, buying could be evident in many counters. This is a good time to buy because no major crisis had led STI to drop. Singtel, DBS, OCBC, Hong kong Land are a few counters that comprises in the STI ETF.