Singapore Just Edged Out Vietnam as Asia's Top Stock Market

(Bloomberg) -- There’s been lots of competition for the title of Asia’s best-performing stock market this year. Among the major equity indexes in the region, eight have climbed to records in the first four months alone.

Today, Singapore’s Straits Times Index nudged higher, boosting this year’s gain to 6.2 percent in local currency terms, and took the top spot from Vietnam’s VN Index, which plunged 2 percent.

The city-state has its three big banks to thank for clinching the top spot across all major equity markets in the continent. On April 30, DBS Group Holdings Ltd., Southeast Asia’s largest lender, reported quarterly profit that beat analyst estimates helped by signs of economic growth and higher U.S. interest rates. Rivals United Overseas Bank Ltd. and Oversea-Chinese Banking Corp. report in the coming days, and could fuel further gains in the Straits Times Index.

"Singapore’s stock market is very much a reflection of its open economy," Edward Lim, chief investment officer of Covenant Capital Pte. in Singapore, said by phone. "It’s really a reflection of the mood in rates and the relatively large exposure that the Singapore stock market has on banks."

Singapore Just Edged Out Vietnam as Asia's Top Stock Market

Meanwhile, Vietnam’s benchmark index has been paring advances after a 43 percent surge in the past year. The VN Index has fallen 14 percent from a record high on April 9, as investors take profit and as a spate of local share sales curbed gains. The country’s stock market more than doubled in value in the past year to $174 billion.

Two of the markets which climbed to records this year -- the Philippines and Indonesia -- are now among the worst performers of 2018. China stock indexes in Shanghai and Shenzhen are down by more than 6 percent this year.

Still Skeptical

Even so, some investors aren’t convinced that Singapore will remain the best stock market in the region. “Valuations are actually stretched. If you look at other Asian markets, China still remains our top pick,” Covenant’s Lim said.

The Straits Times Index is trading at 1-year forward price-to-earnings ratio of 14 times, which is almost 1-standard deviation above its 5-year average, according to Bloomberg data.

While it’s possible that there’s still room for the benchmark index to climb another 3 to 4 percent, “a lot of the gains driven by domestic reasons have been factored in and upside is limited,” said Geoffrey Ng, director of Fortress Capital Asset Management Sdn. by phone from Kuala Lumpur.

©2018 Bloomberg L.P.