VALUE can be found in Singapore’s bond market, according to Ooi Phee Lip, fund manager with Affin Hwang Asset Management Bhd.

“The ringgit has depreciated against the Singapore dollar. But if you buy Singapore papers or hold the currency itself, you will have a gain of 2% to 3%,” says Ooi Phee Lip, who manages the fixed income portion of the Affin Hwang Select SGD Income Fund.

“We are not in that bad a shape [compared with the ringgit’s depreciation against the US dollar]. The yield from Singapore bonds might be less than those of Malaysia, but the currency gains will compensate for it.”

Last year, Singapore bonds did well as investors around the world sought safe-haven assets, according to Ooi. “The Singapore bond market tracks US treasuries very closely. People were expecting rates to go up, but they have been coming down as people chased yields and safe havens. So, as bonds gained favour, yields fell and this has supported bond prices and elevated capital gains for investors,” he says. 

“Going forward, we still see it being well supported, and with [quantitative] easing happening globally [by the European Central Bank and Bank of Japan], liquidity remains ample in the market and we might see funds flowing into the Asian space. This will benefit Singapore as well.” 

Ooi says another plus point is the Singapore bond market’s diversity. “Compared with Malaysia, Singapore has a lot more options in terms of diversification. In Malaysia, you have utilities or banks issuing bonds. But in Singapore, you have banks, property developers, O&G players and other telecommunications companies. Their credit ratings are also fairly strong.”

On the currency front, Ooi sees the Singapore dollar continuing to weaken. “The whole of Asia is depreciating against the US dollar. It doesn’t make sense for the government to defend the Singapore dollar and lose competitiveness in terms of export markets because inflation is also falling. So, we expect the government to continue easing its currency,” he says. 

“Overall, we see the Singapore dollar continuing to be weak against the greenback, but it will be stronger against the ringgit.”

This article first appeared in Personal Wealth, a section of The Edge Malaysia, on March 9 - 15, 2015.

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