S'pore 'safe haven' status sliding

S'pore 'safe haven' status sliding

SINGAPORE (Reuters): Safe and secure Singapore is finding its
best features are no longer as appealing to institutional
investors, who are turning to slightly riskier assets with higher
returns found in other parts of Asia.

Bruised by a fall of nearly 12 percent in its key index so far
this year, Singapore's stock market is one of the worst
performing in Asia.

And as the 1997-98 Asian economic crisis recedes into history,
Singapore's safe haven status is losing its value regardless of
the political problems of its neighbors as funds shift northwards
to chase better returns.

"Singapore is a safe haven but that status only works well
during major crises, when everybody needs to flock into safe
markets," said Michael Lim, regional director for Prudential
Portfolio Managers in Singapore.

"I don't think we are actually in that kind of environment."

Global institutional holdings of Asian stocks rose four
percent at the end of May from April, but Singapore, the fifth
biggest Asian country for fund investments, saw its amount drop
nine percent to $15.3 billion, according to Lipper Asia Ltd data.

On Lipper's top 10 list, institutional holdings in Singapore
were well below South Korea's $19.9 billion, but just slightly
higher than the $14.7 billion in Taiwan, which has seen more than
10 percent gains in its stock market so far this year.

With the belief China will be the main growth engine in Asia,
interest in equity assets is switching to Greater China.

According to the latest quarterly funds survey by Reuters and
Hong Kong-based fund management magazine Benchmark, some 76.9
percent of all respondents picked Hong Kong, Taiwan and China as
their top three destinations for funds.

An eventual global technology industry recovery is sure to
boost Singapore's export-dependent economy, but not many high
tech firms in the city state appear attractive to fund managers.

"Even if the electronics sector does find a floor in the third
or fourth quarter, people are much more likely to jump into Korea
and Taiwan rather than Singapore," said Ong Nai Pew, director for
APS Asset Investment in Singapore.

Singapore stands behind the United States, Japan, South Korea
and Taiwan in chip output.

"If you look at DRAM and semiconductor, South Korea and Taiwan
have better competitiveness. They are better known," said Jason
See, chief investment officer at OUB Asset Management.

"I am not surprised most interest has moved there," he said.

Economists expect more weakness in the second quarter.

Sheree Tan, portfolio manager at Morley Fund Management, also
noted the weak Singapore dollar, which has lost some four percent
of its value against the U.S. dollar so far this year.

The currency's troubles suggest a lack of confidence in the
Singapore economy and in the country's ability to completely
divorce itself from the problems of its immediate neighbors, with
which it has major trade and investment ties.

One of those neighbors, Indonesia, is racked by political
uncertainty over the future of embattled President Abdurrahman
Wahid.