SINGAPORE, Sept 2 — Singapore stocks tumbled by the most among developed markets last month as investors pulled cash from Southeast Asia on concern about the future of global stimulus.

Singapore’s Straits Times Index, the benchmark gauge for the region’s biggest market, dropped 7.5 per cent in the 10 days through August 28, its longest losing streak since 2002. The gauge slumped 6 per cent in August, the worst performance among the world’s developed equity markets. Jardine Cycle & Carriage Ltd., the largest shareholder of Indonesia’s PT Astra International, and commodities trader Olam International Ltd. led declines.

Stocks in Southeast Asia sank faster than global equities on signs regional economic growth is slowing and as Federal Reserve policy makers prepare to reduce US bond buying that had prompted investors to buy riskier assets. Investors pulled US$2.2 billion (RM7.22 billion) from Thailand, Indonesia and the Philippines in August, after plowing US$6.8 billion into the markets in 2012, data compiled by Bloomberg show.

“Singapore is a barometer for Southeast Asia,” Wellian Wiranto, Singapore-based Asian investment strategist at Barclays Plc’s wealth-management unit, said in an interview on August 28. “Choppiness elsewhere brings ripples here. Investors are probably concerned about the risk of contagion amid capital outflows from neighbouring markets like Indonesia and the Philippines.”

Stimulus tapering

The Straits Times Index has slumped 12 per cent since Fed Chairman Ben S. Bernanke said May 22 the central bank may start tapering US$85 billion in monthly US bond purchases if the world’s biggest economy improves. The gauge rose as much as 0.8 per cent today.

The city’s stock market benefited from loose monetary policy in the past few years as shares offered investors attractive dividend yields, said Khiem Do, Hong Kong-based head of multi-asset strategy at Baring Asset Management Ltd., which manages about US$57 billion.

Policy makers were “broadly comfortable” with Bernanke’s plan, minutes of their last meeting showed. The Fed will probably begin paring bond purchases when it next meets September 17-18, according to 65 per cent of economists surveyed by Bloomberg last month.

Singapore is the only developed market among countries in the Association of Southeast Asian Nations, which also includes Laos, Brunei, Cambodia, Indonesia, Malaysia, Myanmar and Vietnam.

Asean redemptions

Shares listed in Singapore are worth US$558.4 billion, compared with US$455.4 billion for Malaysia, the second-biggest equities market in the region, according to data compiled by Bloomberg.

“Singapore has been affected by redemptions from Asean since it’s the biggest market,” Baring’s Do said in a telephone interview on August 26. “It’s being lumped together with Indonesia, Thailand and the Philippines where capital outflows have accelerated.”

While Singapore’s assets are more attractive than those in neighboring Indonesia, investors may be choosing to sell their holdings in Singapore because the city-state’s currency is more stable, he said.

The Singapore dollar fell 0.3 per cent against the US dollar last month, compared with a 5.9 per cent decline for the Indonesian rupiah, a 2.8 per cent drop for the Thai baht, a 2.5 per cent slide for the Philippine peso and a 1.2 per cent loss for the Malaysian ringgit, according to data compiled by Bloomberg.

Currencies slump

Regional currencies slumped as capital markets began to price in reduced inflows when the Fed starts tapering stimulus, Kelvin Tay, Singapore-based chief investment officer for southern Asia-Pacific at UBS AG’s wealth management unit, wrote in a note on August 23. UBS said Singapore was its preferred market in Southeast Asia, upgrading its rating from neutral.

“Singapore is likely to outperform,” Tay said. “Singapore’s strong currency, resilient domestic economy, good earnings-growth potential and exposure to developed markets’ recovery make it appealing to foreign investors.”

The nation’s economic growth rate accelerated to 3.8 per cent in the second quarter from a year earlier as services industries expanded, offsetting weaker exports. In the same period, economic expansion slowed in Thailand, Indonesia and the Philippines.

Singapore’s Straits Times Index traded at 14 times estimated earnings as of August 30, compared with 16.1 for the FTSE Bursa Malaysia KLCI Index, 17.4 for the Philippine Stock Exchange Index and 10.4 for Hong Kong’s Hang Seng Index, according to data compiled by Bloomberg.

‘Less attractive’

Shares on the Straits Times Index offer an average dividend yield of 3.4 per cent compared with 2.7 per cent for 10-year Singapore government bonds, the data show. CapitaMall Trust, the retail property trust controlled by Southeast Asia’s biggest developer CapitaLand Ltd., and Hutchison Port Holdings Trust, partly-owned by billionaire Li Ka-shing’s Hutchison Whampoa Ltd., are among the gauge’s 30 members.

“We don’t see a lot of catalyst for the market to recover at this stage,” Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about US$207 billion, said in a telephone interview on August 26. “As investors start to price in rising interest rates, Singapore’s high-yield REITs become less attractive.”

The FTSE Real Estate Investment Trust Index, which tracks prices of the city’s biggest REITs and has an average dividend yield of 5.3 per cent, sank 6.7 per cent in August. US 10-year bond yields climbed for a fourth month, touching the highest since July 2011.

“Singapore is getting hit from two sides,” Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages more than US$130 billion, said in a telephone interview on August 23. “Firstly, it’s being lumped together with other Southeast Asian markets like Indonesia and the Philippines. Secondly, investors are selling high-yield Singapore REITs as bond yields are rising.” — Bloomberg