Against a backdrop of heightened volatility in markets, Singapore bonds have emerged as a beacon of stability for investors looking for a predictable income source as well as an effective portfolio diversifier.
With a positive outlook fuelled by robust economic indicators and a commitment to sustainable finance, Singapore bonds offer a compelling opportunity for investors seeking a blend of yield and capital growth.
Economic Resilience & Healthy Capital Inflows
Singapore's bond market benefits from an influx of healthy capital, underpinned by the nation's resilient economic performance. Amidst robust system liquidity and heightened market confidence, the 10-Year Singapore Government Bond (SGS) experienced a notable rally of 50 bps in October, reaching 3.00%. With yields still at multi-year highs, this presents an opportune moment for investors to lock-in long-term bond yields prior to the next anticipated global monetary easing cycle.
The island-nation’s economy grew at a faster than expected pace in the 3Q’2023 with GDP +0.7% yoy boosted by tourism activities and a recovery in the manufacturing sector. While full-year growth is expected to still taper off in 2023, the Monetary Authority of Singapore (MAS) believes the economy has reached a turning point in its slowdown. The central bank expects recovery will continue to gain traction as factory output picks up and interest rates peak.
SGD Currency Strength
The strength of the Singapore Dollar (SGD) against other currencies adds an extra layer of appeal for bond investors. The stability of the currency enhances the predictability of returns, making the SGD bond market an attractive proposition.
The SGD's resilience is backed by strong fundamentals. Notably, Singapore maintains a substantial pool of foreign reserves which swelled to 67.12% of its GDP in the 2Q’2023. This acts as a safeguard against external economic uncertainties, instilling confidence among bond investors who prioritise stability and predictability of returns in their portfolios.
Robust Credit Fundamentals with AAA Rating
How to Invest
With a clear focus on quality, the AHAM ESG SGD Bond Fund (formerly known as Affin Hwang SGD Bond Fund) provides a gateway for investors to tap into the vibrant landscape of the Singapore bond universe.
As a certified Sustainable and Responsible Investment (SRI), the Fund employs a negative screening process to exclude companies that are not positioned well for the future, while integrating material ESG factors in the assessment and securities selection.
Fuelled by robust credit fundamentals, healthy capital inflows and currency strength, Singapore bonds stands tall as a defensive asset class through its lower drawdowns and its ability to generate a consistent income stream.