SOURCE: Singapore Fund

Singapore Fund

March 07, 2011 10:28 ET

The Singapore Fund Announces First Quarter Earnings

JERSEY CITY, NJ--(Marketwire - March 7, 2011) - The Singapore Fund, Inc. (NYSE: SGF), an emerging markets closed-end management investment company seeking long-term capital appreciation through investment primarily in Singapore equity securities, today announced its performance results for the three months ended January 31, 2011, the first quarter of its 2011 fiscal year.

For the quarter ended January 31, 2011, the Fund incurred a net investment loss of approximately U.S. $231,000 (equivalent to a loss of U.S. $0.02 per share). In addition, net realized and unrealized gains from investment activities and foreign currency transactions during that same three-month period were approximately U.S. $1,402,000 (equivalent to a gain of U.S. $0.14 per share).

In comparison, during the quarter ended January 31, 2010, the Fund earned net investment income of approximately U.S. $7,000 (equivalent to income of less than U.S. $0.01 per share). In addition, net realized and unrealized gains from investment activities and foreign currency transactions during that same three-month period were approximately U.S. $3,068,000 (equivalent to a gain of U.S. $0.32 per share).

On January 31, 2011, total net assets of the Fund were approximately U.S. $154.6 million. The net asset value ("NAV") per share on that date was U.S. $15.51, based on 9,968,414 shares outstanding. Assuming the reinvestment of the U.S. $1.85 per share dividend paid on December 30, 2010, the Fund generated an investment return of 0.97% for the three months ended January 31, 2011, when measured against the NAV per share of U.S. $17.26 on October 31, 2010, based on 9,493,516 shares outstanding at that time. For the three months ended January 31, 2011, the Fund's benchmark, the Straits Times Index ("STI"), increased by 2.07% in U.S. dollar terms.

In comparison with the same quarter-end of the previous fiscal year, total net assets on January 31, 2010 were approximately U.S. $132.0 million, equivalent to a NAV of U.S. $13.91 per share, based on 9,493,516 shares outstanding.

As of January 31, 2011, the Fund had 98.28% of its net assets invested in Singapore equity securities and 0.93% invested in Malaysian equity securities. The balance of the Fund's net assets were in the form of time deposits and other cash equivalents denominated in Singapore Dollars ("SGD") (1.21%), U.S. dollars ("USD") (0.13%) and liabilities in excess of other assets (0.55)%.

As of March 4, 2011, the Fund's NAV per share was U.S. $15.03, based on net assets of approximately U.S. $149.8 million. On the same date, the Fund's shares on the New York Stock Exchange closed at U.S. $13.96, representing a trading discount to NAV per share of 7.12%.

Singapore Market Review

For the quarter ended January 31, 2011, the portfolio's under-performance was attributed to an underweight position in the banking sector and stock selection in the consumer sector. The underweight position in the banking sector contributed negative 53 basis points ("bps") to the portfolio's performance as the banking sector started to outperform on expectations of positive earnings announcements. The stock selection in the consumer staple sector such as Wilmar International hurt performance (negative 40 bps) due to its venture into the Chinese property sector. The higher average cash level necessary to pay the December 30, 2010 dividend also affected performance in the rising market. However, performance was offset by stock selection in the shipping sector such as Cosco Corporation which added 27 bps to relative performance. The underweight position in the property sector also contributed as the property sector underperformed due to tightening measures announced in January.

Over the past year, the Fund underperformed due to the asset allocation effect with higher cash holdings of over 3%. Strong stock selection in the consumer and healthcare sectors added to strong performance. Underweight holdings in the financial sector also added to relative performance. Sectors that hurt performance were industrials and technology. The Fund's underweight position in selective industrial benchmark stocks like Jardine Group and Sembcorp Industries Ltd. subtracted from relative performance. The mid-cap exposure in the technology sector also underperformed expectations.

The Singapore stock market was higher by 2.1% in USD terms during the quarter under review. Trading activities were relatively quiet towards the year end and into the Lunar New Year. The positive market performance was driven by positive economic growth and improved investors' risk appetite. The STI traded higher in the earlier part of the quarter before correcting in January 2011. Concerns over mounting inflation in the Asian economies dampened sentiment and led to a pullback in most of the regional markets.

On January 13, 2011, the Singapore government introduced new measures to rein in home prices that have continued to rise despite earlier efforts to douse the red-hot property market. The sellers stamp duty ("SSD"), based on the transaction value of the property sold (and not based on gains), was raised to 16%, 12%, 8% and 4% for properties purchased after January 14, 2011 and sold within the first, second, third and fourth years, respectively. Previously, a SSD would only be levied if a property was sold within three years. The loan-to-value ("LTV") limit on housing loans for individuals with one or more housing loans was lowered to 60%. For property purchasers who are not individuals, the LTV limit will also be lowered to 50%. The announcement of the measures led to a knee-jerk decline in most property stocks.

Economic performance continued to show strength with strong manufacturing output. The latest manufacturing output figure showed an increase of 9.0% year over year in December 2010. On a three-month moving average basis, manufacturing output in December 2010 increased 25.5% compared to the same period in 2009. Growth was led by the precision engineering, chemicals and electronics sectors. However, inflation has accelerated to a two-year high, with the Consumer Price Index ("CPI") rising 4.6% in December from a year ago, mainly due to higher transport, housing and food prices. For the year ended December 31, 2010, the CPI rose by 2.8% compared to the same period in 2009.

Outlook and Strategy

Fears of Inflation and monetary policy tightening in China will weigh on risk sentiment. Data that continues to point to a too-rapid pace of economic expansion and soaring food and raw material prices have raised fears that the Chinese government will have to resort to increasingly severe measures to clamp down on inflation. Moreover, the recent harsh winter is threatening to further push up food, and especially vegetable, prices, increasing the likelihood of a spike in food prices in the next two months. Rising wages further add to inflationary pressures. Against this backdrop, we do not see inflation peaking any time soon, with the best case scenario being after the three month period ending March 31, 2011. Hence, we expect the risk appetite, especially within the Asian markets, to remain subdued in the near term due to investor jitters over inflation and further tightening in China.

Oil prices have been increasing steadily since August 2010 on the back of higher demand as the global economy recovered from the downturn. Amid the current turmoil in Egypt, which has triggered fears that oil shipments passing through the Suez Canal could be disrupted, oil prices are expected to continue to spiral upwards and breach $100 per barrel. We expect rising oil prices to bode well for the oil and gas sector and related companies and are increasingly optimistic about this sector. We maintain an overweight position in the offshore and marine sector.

We expect markets to remain volatile amid tightening fears. The economic growth outlook remains healthy and well balanced as the manufacturing industry is expected to moderate and the services industry will continue to benefit from strong domestic consumption. We continue to be positive on cyclical sectors such as commodity, domestic consumption and offshore marine. The earnings growth momentum should continue into the remainder of 2011.

The ten largest industry classifications of the Fund's equity investments held at January 31, 2011 were:

                                                       Percentage of
 Industry                                               Net Assets
-----------                                             ----------
1.  Banks                                                    18.19%
2.  Property Development                                     16.64
3.  Conglomerate                                             10.55
4.  Shipyards                                                 8.35
5.  Health & Personal Care                                    7.21
6.  Telecommunications                                        6.59
7.  Diversified Financial                                     5.33
8.  Food, Beverage, Tobacco                                   4.96
9.  Transportation - Marine                                   4.76
10. Transportation - Air                                      3.06

The ten largest individual common stock holdings at the same date were:

                                                       Percentage of
 Issue                                                  Net Assets
-----------                                             ----------
1.  United Overseas Bank Ltd                                  9.47%
2.  Oversea-Chinese Banking Corp. Ltd                         8.72
3.  Wilmar International Ltd                                  7.21
4.  Singapore Telecommunications Ltd                          6.59
5.  Genting Singapore Plc., Ltd                               6.28
6.  Singapore Exchange Ltd                                    5.33
7.  Hongkong Land Holdings Ltd                                5.15
8.  Jardine Matheson Holdings Ltd                             5.15
9.  Noble Group Ltd                                           4.17
10. Keppel Corp. Ltd                                          4.04


                                        Net Realized
                                       and Unrealized      Net Increase
                                     Gains (Losses) on    (Decrease) in
                          Net          Investment and       Net Assets
For the Quarter       Investment      Foreign Currency      Resulting
 Ended               Income (Loss)      Transactions      From Operations
                    ---------------  ------------------  -----------------

                     Total     Per    Total        Per    Total      Per
                    (000's)   Share  (000's)      Share  (000's)    Share
                    ------   ------  -------     ------  -------    ------

January 31, 2011    $ (231)  $(0.02) $ 1,402     $ 0.14  $ 1,171    $ 0.12
                    ======   ======  =======     ======  =======    ======

January 31, 2010    $    7   $ 0.00  $ 3,068     $ 0.32  $ 3,075    $ 0.32
April 30, 2010         562     0.06   14,298       1.51   14,860      1.57
July 31, 2010          466     0.05    1,007       0.10    1,473      1.57
October 31, 2010       432     0.04   15,081       1.59   15,513      1.63
                    ------   ------  -------     ------  -------    ------

For the Year Ended
October 31, 2010    $1,467   $ 0.15  $33,454     $ 3.52  $34,921    $ 3.67
                    ======   ======  =======     ======  =======    ======


For the Quarter Ended       Net Asset          Market        Share
                              Value            Price*        Volume*
                         ----------------  --------------    -------
                          High      Low     High      Low     (000)
                         -------  -------  -------  -------  -------
January 31, 2011         $ 18.41  $ 15.14  $ 17.88  $ 13.80    1,003

January 31, 2010         $ 14.95  $ 13.73  $ 13.66  $ 12.15      526
April 30, 2010             15.68    13.54    14.01    11.75      402
July 31, 2010              15.63    13.46    14.27    11.82      499
October 31, 2010           17.61    15.24    16.82    13.44      801

*As reported on the New York Stock Exchange.

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