SINGAPORE: As the global equities landscape gets more forbidding by the day, Singapore may turn out to be one of the few markets offering refuge to investors.

There is much doom and gloom around the world, from the war in Ukraine to the news of yet another rout on Wall Street that sets the tone for Asian markets every morning.

The United States benchmark S&P 500 has slumped around 18% from its peak in January, edging towards a bear market - defined as a decline of 20% or more over a sustained period from a recent high.

Asian markets, as measured by the MSCI Asia ex-Japan index, have been in a bear market since December.

The benchmark is now down by about 35% from its peak in February 2021.

MSCI Singapore has come off 18%, after slipping as low as 19.96%, just shy of the bear market earlier this year.

Asia’s decline has been led by the region’s largest economy, with MSCI China declining 50.5% since February 2021. In absolute terms, this makes the bear market in China the fourth-worst on record.

Most analysts expect things to get worse before they get better.

Global markets will continue to grapple with the prospect of moderating economic growth as fiscal stimulus rolls off, interest rates rise with central banks tightening monetary policy, and inflation surges amid supply shocks from Russia’s invasion of Ukraine and lockdowns in China, they said.

The odds of the US economy plunging into a recession within the next year were estimated at 30% in a recent Bloomberg poll of economists.

Clifford Bennett, chief economist at Australia’s ACY Securities, said there is significant risk of a triple recession across the northern hemisphere of the world’s three largest economies - Europe, the US and China.

“The hard truth is that global stock markets are only in the very early stages of pricing in a global economic slowdown that is already in full swing,” he said.

A recent Bank of America (BoA) survey found global fund managers are stacking up cash by selling equities, with cash levels rising to highs last seen in September 2001.

BoA strategists described the results as a reflection of “extremely bearish” sentiment among asset managers.

Mabrouk Chetouane, Natixis Investment Managers’ head of global market strategy, said: “Investors are questioning economies’ resiliency to the multiple shocks they now face.”

However, some analysts believe smart investors can do well by buying into markets better able to manage the present volatile conditions.

Carmen Lee, head of OCBC Investment Research, said unlike previous market downturns that were quite synchronised worldwide, the main factors this time round are mainly rising interest rates and commodity prices, which have not hit Singapore’s index heavyweights like banks, property and telecoms as badly as was expected.

“Singapore emerging as a safe haven is a bit unique in this particular crisis,” she told The Straits Times.

Lee’s top recommendations include Singapore’s top banks and Singtel, as well as Singapore Airlines, which is benefiting from the pickup in travel demand as the world reopens.

Wilson Ng, Singapore-based equities analyst at Morgan Stanley, sees Singapore equities as a safe haven with above-trend growth, a relatively benign rise in interest rates and a strengthening currency targeted by the central bank.

“Economic conditions look relatively robust, with a strengthening currency supporting capital inflows to the market,” he said.

Morgan Stanley expects Singapore’s gross domestic product growth to decelerate from the decade-high 7.6% in 2021, but still remain above trend levels at 3.1%, thanks to the pace at which Covid-19 curbs have been relaxed this year, which has broadened the earnings recovery to sectors more affected by the pandemic.

Ng said interest rates here are likely to rise further, but on a relatively moderate path compared with the US, as the Monetary Authority of Singapore targets currency appreciation to keep inflation in check.

“That relative currency strength is conducive for capital flows to Singapore-dollar assets, providing support for the equity market, in our view,” he said.

In addition, he said, Singapore equities in aggregate are likely to sustain around 20% annual earnings growth through 2024, exceeding many developed markets and regional economies, and about twice as much as the global average.

 - ANN