Goldman Sachs: coming recession will hit SG like a frying pan in the face

[Rogue Trader]

Saturday, Sep 17, 2011
The Business Times

Slowdown will hit S'pore more: Goldman

By Felda Chay SINGAPORE's stock market may be less able to withstand the effects of global economic turmoil compared to that of its less export-oriented South-east Asian peers, says Goldman Sachs. The bottomlines of its export-dependent companies could be more exposed to a worldwide slowdown, it adds. Still, it expects the MSCI Singapore to grow by 4 per cent this year, and 7 per cent next year. In South-east Asia, Goldman is most bullish on the MSCI Indonesia and MSCI Malaysia for 2012, which it expects will rise by 15 per cent and 14 per cent, respectively. 'We still think there are a lot of good things going on in Singapore ... The finance industry is doing well, biotech is doing well. Singapore has done a very good job at transforming into a high value-add, knowledge-based economy, and so, we are fans of all that,' said Timothy Moe, chief Asia Pacific regional equity strategist at Goldman Sachs, in an interview yesterday. 'But in terms of looking at equity market valuations and earnings growth, the fact that the index is pretty well dominated by banks and property stocks still, all that suggests that there is a greater degree of sensitivity to the global asset price cycle and that makes us somewhat less optimistic about Singapore as compared with the other more domestically oriented economies.' In a report dated Sept 12, Goldman said that it expects Singapore to enter into a technical recession with negative sequential growth in the third quarter of 2011. It is forecasting a 2.5 per cent quarter-on-quarter annualised dip in Singapore's gross domestic product in the July-September period. Still, a technical recession is not something to worry about too much, said Mr Moe. In the report, Goldman noted 'some slowing in momentum is also to be expected after the sharp 27 per cent quarter-on-quarter annualised spike in the first quarter of 2011'. Goldman is bullish on the markets in Indonesia and Malaysia because these are economies that have embarked on economic programmes that could drive growth. More importantly, global investors seem to have little knowledge on the policies being implemented, meaning that their effects have not been priced in.

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