Singapore: 3 Reasons Why the Asian Dynamo is a Buy

Mt. Faber is Singapore’s second-highest peak. Climb up here and you’ll see why investors are bullish on this 275-square-mile island off the southern tip of the Malay Peninsula.

Above is a snap I took of the view. To the right you can see major construction going on. In the background you can see the Port of Singapore, full of deep-sea cargo ships at anchor.

The Port of Singapore is the world’s busiest port in terms of total shipping tonnage (the total volume of ships handled). And it’s just behind Shanghai in terms of total cargo tonnage (total weight of goods handled).

Either way, it’s a sight to behold. And it’s a key reason why Singapore’s economy is so strong. Last year, the economy here grew by a record 15%—far stronger even than China, which grew closer to 10%.

Singapore’s growth is expected to slow this year to somewhere between 4% and 6%. But when you consider that the U.S. will struggle to grow at 3% this year, that’s still very strong.

If you’re not already familiar with Singapore as an investment destination here’s a quick overview:

  • Singapore is a city, a state and an island all in one. Formerly part of the British Empire, it merged with Malaysia in 1963 and became a fully independent state in 1965.
  • There are 5 million people living in Singapore, made up of three major ethnic groups: Chinese, Indian and Malay. Mandarin-speaking Chinese are the biggest group by far, making up about 77% of the total population.
  • Singapore is a developed economy with an extremely wealthy population. In fact, according to the IMF, last year it was the third wealthiest country in the world (after Luxembourg and Qatar) in terms of economic output per head. That puts it ahead of Norway, Switzerland and the U.S.
  • It is situated smack in the middle of the world’s busiest shipping lanes, right next to the vital trading channel, the Straits of Malacca.

I’m in Singapore as part of an investment-scouting trip. And I can tell you that so far I’m impressed.

Singapore is not your stereotypical Asian city. It’s clean, ultra safe, quiet and modern. That doesn’t mean it’s not colorful—it is.

In Little India, for instance, where I was yesterday, you could be forgiven for thinking you were in downtown Cochin— it was full of southern Indian Singaporeans celebrating the Hindu festival of Pongol.

In Little China, the Chinese Singaporeans were getting ready for the Chinese New Year. The narrow streets were packed with shoppers, street hawkers festive bunting.

But Singapore is a major financial hub too. And it also has a big financial center full of glistening glass office buildings, Starbucks outlets, and even a Hard Rock Café. Here locals natter into iPhones, wear the latest designer gear and drive the latest BMWs, Audis and Toyotas. These guys make New Yorkers look laid back!

Singapore has a lot of things going for it from an investment standpoint. Top draws include:

  • Proximity to China – Singapore is both geographically and culturally close to China and has big trade and business ties with Beijing. As China grows, so will Singapore.
  • Diversified economy – Singapore has a big pharmaceuticals sector as well as big financial services, tourism and shipping sectors. This means it is well positioned to weather any future economic storms that may come along.
  • Free trade philosophy – The Heritage Foundation recently ranked Singapore as the second-freest economy in the world after Hong Kong. It was relatively low government spending as a percentage of GDP, strong property rights and relatively low levels of corruption (joint third with Sweden and just behind Denmark and New Zealand).

Of course, you can always invest in Singapore by way of the iShares MSCI Singapore Index Fund ETF (NYSE:EWS). This will give you broad exposure to Singapore’s finance, industrial materials and telecoms sectors.

This is a solid play, if you don’t have access to “boots on the ground” knowledge of Singapore.

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