SOURCE: Singapore Fund

September 08, 2010 10:55 ET

The Singapore Fund Announces Third Quarter Earnings

JERSEY CITY, NJ--(Marketwire - September 8, 2010) -  The Singapore Fund, Inc. (NYSE: SGF), a 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 July 31, 2010, the third quarter of its 2010 fiscal year.

For the quarter ended July 31, 2010, the Fund earned net investment income of approximately U.S. $466,000 (equivalent to income of U.S. $0.05 per share) resulting in net investment income for the nine-month period of approximately U.S. $1,035,000 (equivalent to income of U.S. $0.11 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. $1,007,000 (equivalent to a gain of U.S. $0.10 per share). As a result, the net realized and unrealized gains increased to approximately U.S. $18,373,000 (equivalent to a gain of U.S. $1.93 per share) for the nine months ended July 31, 2010.

In comparison, during the quarter ended July 31, 2009, the Fund earned net investment income of approximately U.S. $98,000 (equivalent to income of U.S. $0.01 per share) resulting in net investment income for the nine-month period of approximately U.S. $1,357,000 (equivalent to income of U.S. $0.14 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. $39,272,000 (equivalent to a gain of U.S. $4.15 per share). As a result, the net realized and unrealized gains increased to approximately U.S. $43,981,000 (equivalent to a gain of U.S. $4.64 per share) for the nine months ended July 31, 2009.

On July 31, 2010, total net assets of the Fund were approximately U.S. $148.4 million. 

The net asset value ("NAV") per share on that date was U.S. $15.63, based on 9,493,516 shares outstanding. Assuming the reinvestment of the U.S. $0.26 per share dividend paid on December 30, 2009, the Fund generated an investment return of 15.08% for the nine months ended July 31, 2010, when measured against the NAV per share of U.S. $13.85 on October 31, 2009, based on 9,477,893 shares outstanding at that time. For the nine months ended July 31, 2010, the Fund's benchmark, the Straits Times Index ("STI"), increased by 15.69% in U.S. dollar terms. 

In comparison with the same quarter-end of the previous fiscal year, total net assets on April 30, 2009 were approximately U.S. $85.1 million, equivalent to a NAV of U.S. $8.97 per share, based on 9,477,893 shares outstanding.

As of July 31, 2010, the Fund had 92.79% of its net assets invested in Singapore equity securities, 2.34% invested in Malaysian equity securities and 1.81% invested in Thai 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") (1.48%), U.S. Dollars ("USD") (0.02%) and assets in excess of other liabilities 1.56%. 

As of September 7, 2010, the Fund's NAV per share was U.S. $16.09, based on net assets of approximately U.S. $152.7 million. On the same date, the Fund's shares on the New York Stock Exchange closed at U.S. $14.75, representing a trading discount to NAV per share of 8.33%.

Singapore Market Review

During the quarter ended July 31, 2010, the NAV of the Fund increased 1.03%, slightly underperforming the STI benchmark, which increased 1.04% in USD terms. Cumulatively for the twelve months ended July 31, 2010, the NAV increased 21.4% against the rise in the benchmark of 18.9% in USD terms.

Over the past year, the Fund outperformed due to stock selection however performance was offset by a higher average cash position of over 3%. Strong stock selection in the consumer discretionary and healthcare sectors added to strong performance. Underweight positions in the financial sector also added to relative performance. Sectors that hurt performance were industrials and technology. The underweight position in selective industrial benchmark securities like Jardine Group and Sembcorp Industries Ltd. subtracted from relative performance. The mid-cap exposure in the technology sector also did not perform to expectation.

The market corrected sharply in May over concerns of slower growth amid tightening measures in China and European region austerity measures. However, the market recovered as valuations became attractive.

Economic performance continued to show strength with strong growth of industrial production over the quarter. Export growth remained healthy amid a slower external economic environment. Industrial production increased by 58.6% in May from a year earlier, after a revised increase of 49.7% in April 2010. Excluding biomedical manufacturing, output grew 30.6%. Industrial production increased for the sixth consecutive month. Non-oil domestic exports also climbed 24.4% in May from a year earlier. Exports increased for the seventh consecutive month. With a better economic performance in the first quarter of 2010 and stronger than expected economic growth in the second quarter, the Ministry of Trade and Industry (MTI) revised its forecast in the middle of July of growth in the Singapore economy in 2010 to 13% - 15% from 7% - 9% previously.

The banking sector underperformed despite generally good quarterly earnings announcements. Oversea-Chinese Banking Corp. reported 1Q2010 results that were better than expected. Net profit that came in at S$676m was an increase of 35% and 24% from the previous quarter and year, respectively. The earnings were driven mainly by higher non-interest income and a strong contribution from 87%-owned subsidiary, GE Holdings. GE Holdings reported a 23% rise in 1Q2010 net profit on the back of higher insurance and investment profit. United Overseas Bank also posted results that were above expectations with net profit rising by 34% to S$700m from the previous quarter. Although net interest income was flat, the strong performance was driven mainly by much higher non-interest income from growth in fees and commissions and other non-interest income. The property sector outperformed the market as valuations looked attractive and investor confidence recovered. Transaction volume remained strong as pent up demand returned after expectation of more tightening measures subsided.

Outlook and Strategy

While the global economy continues to recover, growth in the second half is likely to be moderate. In the U.S. leading indicators continue to suggest a slowing of the economy. In the EU, domestic demand could remain under pressure as the debt situation remains unresolved. In Japan, factory output declined 1.5% in June 2010 from May 2010. However, the expectation is that while growth is likely to slow, a double-dip recession is unlikely at this point.

Given this backdrop, the unusually strong growth experienced by the Singapore economy in the first half of 2010 is unlikely to recur in the second half. In Singapore, signs of a slower second half have materialized. On a seasonally adjusted month-on-month basis, manufacturing output decreased 23.4% in June 2010. Excluding biomedical manufacturing, output declined 1.8%.

We expect markets to remain volatile in the short term with the backdrop of a slowing global economy. The current round of corporate results may show signs of slower growth but will remain healthy. We favor companies geared to regional domestic demand, as these could see the most upgrades.

A key risk to the market includes fiscal blowouts in peripheral Europe that could lead to a strong rally in the USD and much slower global growth, which may in turn impact the emerging growth outlook. This could undermine risky assets including Singapore equities in the near term, as the USD has been used, to some degree, as a funding currency for carry trades.

The ten largest industry classifications of the Fund's equity investments held at July 31, 2010 were:

  Percentage of
    Industry  Net Assets
       
1. Banks 21.61%
2. Property Development 11.12
3. Conglomerate 9.99
4. Telecommunications 7.55
5. Transportation - Marine 6.66
6. Health & Personal Care 6.27
7. Transportation - Air 5.20
8. Shipyards 3.16
9. Transportation - Land 3.04
10. Industrial 2.97

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

      Percentage of
    Issue Net Assets
     
1. Oversea-Chinese Banking Corp. Ltd 11.24%
2. United Overseas Bank Ltd 10.37
3. Singapore Telecommunications Ltd 7.55
4. Wilmar International Ltd 6.27
5. Jardine Matheson Holdings Ltd 5.38
6. Singapore Airlines Ltd 5.20
7. Hongkong Land Holdings Ltd 4.09
8. Noble Group Ltd 3.63
9. Ezra Holdings Ltd 3.44
10. Keppel Corp. Ltd 3.16
     

 

QUARTERLY RESULTS OF OPERATIONS  
 
 
 
 
For the Quarter Ended
 
 
 
 
 
Net Investment Income (Loss)  
 
 
 
 
Net Realized and Unrealized Gains (Losses) on Investment and Foreign Currency Transactions  
 
 
 
 
 
 
 
 
 
    
Net Increase (Decrease) in Net Assets Resulting From Operations
 
 
 
 
 
                                               
      Total       Per     Total       Per       Total       Per  
      (000's)       Share     (000's)       Share       (000's)       Share  
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  
                                               
For the Nine Months                                              
Ended July 31, 2010   $ 1,035     $ 0.11   $ 18,373     $ 1.93     $ 19,408     $ 2.04  
                                               
January 31, 2009   $ 385     $ 0.04   $ (4,258 )   $ (0.45 )   $ (3,873 )   $ (0.41 )
April 30, 2009     874       0.09     8,967       0.94       9,841       1.03  
July 31, 2009     98       0.01     39,272       4.15       39,370       4.16  
October 31, 2009     500       0.06     6,305       0.67       6,805       0.73  
                                               
For the Year Ended                                              
October 31, 2009   $ 1,857     $ 0.20   $ 50,286     $ 5.31     $ 52,143     $ 5.51  

 

PER SHARE SELECTED QUARTERLY FINANCIAL DATA
 
For the Quarter Ended   Net Asset Value   Market Price*   Share Volume*
                 
    High   Low   High   Low   (000)
                             
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
                             
January 31, 2009   $ 9.26   $ 7.71   $ 8.84   $ 6.11   1,111
April 30, 2009     8.97     6.78     7.91     5.68   919
July 31, 2009     13.13     8.97     11.65     7.92   717
October 31, 2009     14.26     12.48     13.00     10.88   934
                             
*As reported on the New York Stock Exchange.

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