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.