OREANDA-NEWS. Singapore Industrial stocks have a history of being more correlated to the ups and downs of the world’s Industrial stocks than their Asia counterparts.

Given the size of Singapore’s total trade value at 350% of Gross Domestic Product (GDP), this may not be of a great surprise to investors. As maintained in IMF Working Paper No. 16/52: Singapore’s Export Elasticities Singapore is a highly export orientated economy with seven in ten of all industries that produce two-thirds of Singapore’s total output being export-orientated. 

Over the past 120 trading days the correlation of the MSCI Singapore Industrials Index to the MSCI World Industrials Index stands at 0.54, while the average correlation of both indices over the past five years stands at 0.40. Please note that a correlation of 1.00 implies full correlation in the daily price swings of the two indices.

As illustrated in the table below, over the past five years, the average day-to-day correlation of the MSCI Singapore Industrials Index to the MSCI World Industrials Index at 0.40 was higher than that of the other Asian Industrials Indices. Please note the MSCI Japan Industrials Index was omitted from the analysis given Japan represents as much as 15% of the MSCI World Industrials Index.  

Five Year Average Correlation of MSCI Country Industrials Indices to the MSCI World Industrials Index

Source: SGX, MSCI Inc, Bloomberg

The MSCI Singapore Industrials Index is made up of the nine MSCI Singapore Index constituents that represent the Industrials Sector as categorised by the Global Industry Classification Standard (GICS®). The nine stocks of the MSCI Singapore Industrials Index are Singapore Airlines, Keppel Corporation, Singapore Technologies Engineering, ComfortDelGro Corporation, Hutchison Port Holdings Trust, Sembcorp Industries, SATS, Yangzijiang Shipbuilding (Holdings) and Sembcorp Marine. Please note that Jardine Matheson Holdings now accounts for a 22% weighting in the MSCI Hong Kong Industrials Index.

The much broader MSCI World Industrials Index is designed to capture the large and mid-cap segments across 23 Developed Markets countries around the world. There are a total of 258 constituents in the MSCI World Industrials Index, with a combined market capitalisation of US$3.3 trillion - please click here for a factsheet.

Within Singapore’s Industrials Sector there have been instances of stocks with international services that were more correlated to the MSCI World Industrials Index than stocks with less international focus. For instance, Keppel Corp and Sembcorp Marine were three times as correlated to the MSCI World Industrials Index as SMRT and SBS Transit. This would have been expected given the relatively greater sensitivity of the former two stocks to global economic developments. Furthermore, given the relative international orientation of SATS compared to SMRT, the correlation of SATS to the MSCI World Industrials Index was more than four times that of SMRT over the past five years.

Singapore’s 20 Largest Capitalised Industrial Stocks

Beyond the nine stocks of the MSCI Singapore Industrials Index, the 20 largest stocks of the Industrials sector, as categorised by GICS® have a combined market capitalisation of S$180.1 billion. In the year thus far, these 20 stocks averaged a total return of -1.9%. The 20 stocks currently trade at price-earnings and price-to-book ratios of 15.6 and 1.6 respectively, and maintain a dividend yield of 3.9%. Please note that Jardine Matheson Holdings and Jardine Strategic Holdings are not members of the MSCI Singapore Industrials Index.  

Among the 20 largest Industrial stocks listed on Singapore Exchange (SGX), the top five performers in terms of year-to-date total returns were Noble Group (+8.7%), SMRT Corporation (+8.3%), Jardine Matheson Holdings (+6.3%), United Engineers (+5.0%) and Singapore Technologies Engineering (+3.3%). Together, they averaged a 6.3% year-to-date return.

The table below details the 20 stocks, and is sorted according to market capitalisation. Click on each stock to visit its profile page on SGX StockFacts.

Source: SGX, Bloomberg & SGX StockFacts (data as of 9 March 2016)

Please note that among the 20 stocks, Jardine Matheson Holdings, Jardine Strategic Holdings and Hutchison Port Holdings trade in USD. Please note that Hutchison Port Holdings is also quoted in Singapore dollars. For comparative representation, their last close price, 12 month high and 12 month low price are displayed are in USD terms and not SGD equivalents in the table below.