4 key investment sectors in Singapore to focus on in 2017
2016 in coming to a close and it is now time for you to look at your investment portfolios. Here’s a look at four sectors for you to consider investing in come 2017 in Singapore:
According to a recent survey by the Monetary Authority of Singapore (MAS), Singapore’s economy is expected to grow by 1.8% next year, instead of the 2.1% stated in a similar survey conducted in June. However, the latest survey also showed that private consumption was one area of optimism.
The survey saw an expected uptick in private consumption from a 2.5% growth rate to a 3% growth rate in 2017, one of a few domestic industries that saw an increase in expected growth compared to the June survey.
This makes consumer staples, which is the largest destination for domestic private consumption, a key sector to focus on in 2017. Investors should consider taking a closer look at companies that produce these essential products, such as food, beverages and household items.
The same MAS survey showed a still optimistic view being taken as to the expected growth in the construction industry in Singapore. While the expected growth did decline to 3%, from 3.3% in June, this still sees construction tied with private consumption as the biggest driver for growth in the Singapore economy. Domestic demand is expected to drive a lot of this growth.
There is also a great deal of planned government expenditure on infrastructure, such as expansions to the Mass Rapid Transit (MRT) network and healthcare facilities.
Investors would be well-advised to consider the domestic construction industry and particularly companies related to work in the sectors that can expect government expenditure windfalls. While construction isn’t necessarily a new or flashy industry, investment is a game of returns and the economic consensus for this industry is positive.
One aspect of the financial services sector that is expected to see significant growth in 2017 is the reinsurance segment. This year has seen a compound annual growth rate of 17.5% so far and there doesn’t seem to be any sign of this slowing down.
A key driver to the sector has been government incentives for reinsurers as Singapore seeks to become a leader in the market and a regional reinsurance hub. Natural disasters throughout the region in 2016 has further reinforced the drive for insurers to offload some of their risk to reinsurers, for greater and greater shares of the premiums they charge.
Key sectors to focus on in 2017 aren’t solely those that can be expected to grow the most during the year. One sector in Singapore that is expected to see a decline is the non-oil domestic exports market. In the MAS survey, this is the only sector in Singapore that is expected to decline in 2017 (3.6% compared to 2.1% in the June survey). The outlook for this sector is not good as it is not expected to recover from the declines it already experienced in 2016.
A down market sector provides a number of opportunities for investors to act upon.
Firstly, an investor currently holding investments in the domestic export sector may want to consider reassessing their position and divesting themselves of the holding. Secondly, put options can be used by investors who want to bet on a further decline in the sector. Finally, when a sector sees a general decline, the opportunity can arise to invest in undervalued companies.
This strategy can sometimes take time to develop, but it can see investors getting a good return as the sector recovers and the underpriced companies adjust to a more accurate valuation.