TheStreet.com Ratings: Finding Growth in Singapore

Long before China and India hit the modern world economic stage, Singapore, which gained its independence from the Malaysian Federation in 1965, was the gateway to commerce in Asia.

The country's port is among the world's largest and is second only to Hong Kong as a transshipment hub. However, due to its unique position as a key crossroads in the global trading system, Singapore ranks as the world's busiest port overall. In fact, it handles a quarter of the world's shipping containers and half of the world's supply of crude oil.

With a population of around 4.6 million, the country generates a per capita gross domestic product equivalent to $44,600, one of the highest per capita GDPs in the Asian region, trailing only Hong Kong and Japan. In addition, according to the quality-of-life index put together by the Economist Intelligence Unit, Singapore has the highest standard of living in Asia and is ranked 11th in the world.

The country's economic fundamentals -- year-over-year GDP growth of 8.1% as of October, low consumer-price inflation of 0.7%, a 2.8% jobless rate and the largest current-account surplus (28.5%), as a percentage of GDP, of any Asian nation -- are very healthy. Singapore also enjoys a budget surplus equal to 6% of its GDP.

Though such a high growth rate makes the economy vulnerable to overheating, the slowing U.S. economy will act as a stabilizer, bringing the island's growth back to more sustainable levels.

The key point for investors is that Singapore, even if facing a lower GDP rate, is likely to be a very attractive investment, as capital tends to seek stable, well-run economies producing competitive returns. With the U.S. economy slowing, Singapore's appeal can only grow.

An Asian Play

TheStreet.Com Ratings believes the iShares MSCI Singapore Index Fund (EWS) is a good opportunity for investors interested in exposure to the country.

This exchange-traded fund seeks results in line with the MSCI Singapore Free Index, which it tracks closely in terms of holdings and their respective weightings. TheStreet.com Ratings rates EWS a buy and gives it a B+ rating.

The fund's portfolio is very concentrated, and with 70.61% of assets allocated toward its top 10 holdings, is best described as nondiversified.

This concentration does carry risks. If these particular companies, and the sectors they are in, do not perform well, such an approach could result in poor returns. However, with that risk, of course, comes the potential for higher returns should the fund's bets prove correct.

As the table below illustrates, the fund is making those bets primarily in the banking, capital goods, telecommunications, real estate and transportation areas.

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Big on Banking
Top Sector Allocations	Percentage
Banking	35.46%
Capital Goods	14.22%
Telecommunications	11.73%
Real Estate	11.16%
Transportation	9.08%
Media	4.17%
Consumer Services	3.19%
Technology Hardware & Equipment	2.17%
Diversified Financials	2.00%
Semiconductors & Semiconductor Equipment	1.74%
Source: Bloomberg

The table below lists MSCI Singapore's recent holdings:

Heavy Weighting in the Top 10
Name	Ticker *	% Net Assets	Sector
DBS GROUP HOLDINGS LTD.	DBS	13.12	Financials
UNITED OVERSEAS BANK LTD.	UOB	11.98	Financials
SINGAPORE TELECOMMUNICATIONS LTD.	ST	11.73	Telecommunication Services
OVERSEA-CHINESE BANKING CORP.	OCBC	10.36	Financials
KEPPEL CORP. LTD.	KEP	4.75	Industrials
SINGAPORE AIRLINES LTD.	SIA	4.68	Industrials
SINGAPORE PRESS HOLDINGS LTD.	SPH	4.17	Consumer Discretionary
CAPITALAND LTD.	CAPL	3.85	Financials
CITY DEVELOPMENTS LTD.	CIT	3.19	Consumer Discretionary
FRASER AND NEAVE LTD.	FNN	2.78	Industrials
% Top 10 Holdings		70.61
Source: iShares * These stocks trade on overseas exchanges