Recent corporate restructurings by Sembcorp Industries, CapitaLand, SPH, and Keppel Corp could be indicative of an impending slew of restructurings by local conglomerates.
In 2020, Sembcorp Industries made the decision to distribute its entire stake in Sembcorp Marine, its marine arm, to shareholders. This decision came about after two years of losses and a dim outlook for SembMarine, which was also hit by COVID-19 and its ensuing effects like falling oil prices.
The decision was touted as an opportunity for Sembcorp Industries to reposition itself and focus specifically on urban development and utilities, which could make the company easier to value.
It appears this decision has motivated other Singapore conglomerates to critically evaluate their own businesses, as CapitaLand, Keppel Corporation (Keppel Corp), and Singapore Press Holdings (SPH) have all recently announced large restructuring moves.
One of the major influencing factors may have been declining returns on equity (RoE) to shareholders, which investors often use as a gauge for a company’s productivity. COVID-19 has caused many businesses to reevaluate the three ways to boost low RoE according to the DuPont model, which are increasing the profit margin, increasing the amount of borrowings, and reducing the amount of assets used in the business.
Given that businesses cannot always assume that profits can be increased simply by increasing sales or raising prices, especially if they don’t have adequate pricing power, and that borrowing can be risky if inflationary pressures result in higher rates of interest in the future, many businesses have turned to reducing assets to boost RoE.
Like Sembcorp Industries, the aforementioned companies have restructured in response to recent conditions as well as key external drivers. For example, Keppel Corp had to respond to an increasingly unfavourable consumer attitudes towards fossil fuels, unstable oil prices, and the adverse impacts of COVID-19 on its shipbuilding businesses. CapitaLand had to pivot to an asset-light approach to real estate businesses with more predictable earnings as COVID-19 hit its retail, lodging, and residential business segments. Finally, SPH decided to focus on its property business and turn its media arm into a not for profit, as COVID-19 caused a 31.4% decline in advertising revenue on top of already declining sales and revenues.
Given all these changes amongst Singapore’s conglomerates, it seems likely that other sectors and businesses will also consider using restructuring as a means to adjust to shifting competitive landscapes. CNA suggests that the taxi business is an ideal candidate for restructuring thanks to lower passenger volumes and declining efficiency in use of assets.
Only time will tell how many other businesses will follow the route of Sembcorp Industries, Keppel Corp, CapitaLand, and SPH, and if restructuring will truly reverse the fortunes of these businesses.
NUS announces its 2 new graduate programs in fintech that will commence in the upcoming academic year, and ALTIOS discusses how this will strengthen Singapore’s fintech landscape.
2019 was a banner year for Singapore’s fintech industry, with investments having doubled to more than US$861 million compared to the year before, and more than 40 innovation labs being set up to drive innovation within the traditional financial institutions and facilitate collaborations with fintech firms.
The nascent Singapore fintech industry has expanded to an estimated 1,000 firms, making it the largest hub in South-east Asia in terms of total fintech-investment dollars as well as number of fintech firms.
While Fintech firms have not been spared from the economic drawbacks of Covid-19, Singapore’s Fintech has proven itself to be resilient. It has even thrived because of the acceleration of the adoption of digital finance by consumers across all age groups and businesses of all sizes.
Now, we are seeing even more signs of Singapore’s commitment to fintech and integrating it into society. The National University of Singapore (NUS), ranked the #11 best university in the world by QS Global World Rankings 2021, recently announced that it will begin offering two new graduate programs in fintech in the upcoming academic year. The programs will be jointly funded by the Monetary Authority of Singapore (MAS), the National Research Foundation Singapore (NRF), and NUS via the Asian Institute of Digital Finance (AIDF) at NUS.
NUS hopes that these programs will help “build a robust ecosystem of high-quality research talent and capabilities to support the fast-growing financial industry in Singapore.”
As Singapore continues its quest to become the premier destination for fintech, the graduates of these programs will certainly be an asset to the innovative fintech startups and companies that have set up base In Singapore, such as the 4 digital banks that were recently given licenses to operate by MAS.
Having the ability to hire top talent locally will also be a big draw for homegrown fintechs looking to make their mark in the space, which will in turn strengthen the fintech ecosystem in Singapore.
Overall, NUS’ commitment to improving the talent pool in fintech and the progressive regulatory support the government has demonstrated are positive signs for the continued growth of Singapore’s fintech industry.
The recent coup in Myanmar has upended assessments and expectations about Myanmar’s economic potential as well as business opportunities in the region.
ALTIOS shares the expected impacts of the coup on key markets in ASEAN such as Vietnam and Singapore.
Myanmar’s economy and engagement with other countries has long been defined by its current rulers – its military junta, whose ruling of the country has drawn condemnation from others in the form of sanctions and withdrawal of foreign direct investments (FDI).
High expectations were placed on Myanmar after the National League of Democracy (NLD), led by Aung Suu Kyi, won the 2015 elections. However, in recent years, a combination of poor infrastructure, the government’s handing of the Rohingya crisis, and bureaucratic red tape have led to a decline in foreign investment.
Recently, the military coup by the junta has shaken up investor perceptions and Myanmar’s projected economic recovery, which was already fragile considering the COVID-19 pandemic.
Sian Fenner, lead Asia economist at Oxford Economics, predicted that the political upheaval would jeopardize the $3.5 billion (€2.9 billion) in foreign investment proposals that were yet to be approved, with “projects likely to be delayed at best, or possible cancelled.”
What does this mean for ASEAN investments in Myanmar?
First of all, certain ASEAN countries like Cambodia and Vietnam could stand to gain new foreign investments. With investors pulling out of Myanmar in droves due to the military coup, Vietnam and Cambodia are attractive options for those looking into alternative Southeast Asian bases.
Field Pickering, the head of venture investing at the Singapore-based Vulpes Investment Management, was one of many with interests in Myanmar who offered insight into the Vietnamese market. According to Pickering, “Once borders open up after the pandemic, and Asian investors return physically to Vietnam, I believe it will be a feeding frenzy and you will see deal activity erupt, pushing Vietnam to the top of the list of emerging markets attracting foreign investment.”
Secondly, the coup poses great risk to the business interests and investments of Singapore, which accounts for 34% of overall approved investment in Myanmar (24 billion USD) and is the largest foreign investor in Myanmar. While the long-term economic effects of the coup are yet to be determined, many Burmese are calling on various Singaporean stakeholders to divest from Myanmar. A few actors have begun this process, such as Lim Kaling, the co-founder of the technology company Razer, but activist groups such as Justice for Myanmar are pushing for more to follow suit. As the clash between the junta and its citizens continues, it remains to be seen how key investors in Myanmar like Singapore choose to prioritise commitments to upholding human rights and democracy, relationships with the current ruling government of Myanmar and its allies, and its vested economic interests in the region.
Finally, the coup threatens the tenuous unity of ASEAN. Long-standing differences in attitudes towards Myanmar and ASEAN’s commitment to non-interference have led to many outsiders condemning ASEAN responses to the coup, with countries like Thailand, Vietnam, and Philippines stating that the coup is an internal affair. Additionally, the delicate political situation and differences in opinions prevented ASEAN from producing a joint statement on the situation. Altogether, the lack of consensus on the situation and commitment to a resolution combined with general uncertainty about Myanmar may deter FDIs from coming to Myanmar and ASEAN as a whole.
Overall, businesses should exhibit a high level of caution as they navigate Myanmar’s new normal. Businesses should also be aware that their decisions regarding Myanmar carry an undeniable political message.
Southeast Asia’s emergence as a fintech hotspot in recent years and the establishment of some of the world’s most advanced fintech markets in Asia has created many opportunities for businesses and consumers.
The Monetary Authority of Singapore’s (MAS) issuing of digital full bank licenses to the Grab-Singtel consortium and tech giant Sea is a signifier of the liberalisation of the financial industry in Singapore and demonstrates how new players will take advantage of opportunities.
Considering that the COVID-19 pandemic has impacted traditional banking services, and that more and more people and businesses are going online, adopting fintech has become crucial to maintaining Singapore’s reputation as one of the world’s top financial centres.
Thus, it will be interesting to see how the Monetary Authority of Singapore’s (MAS) issuing of digital full bank licenses to the Grab-Singtel consortium and tech giant Sea will improve financing options for SMEs in Singapore and in other parts of Southeast Asia.
While the Big Three banks in Singapore, OCBC, DBS, and UOB already have robust digital services, Grab-Singtel and Sea expect to cater to small businesses and underbanked consumers. Examples include gig workers with flexible incomes, time-starved PMETs, and micro-SEMs who face limited financial access, and underbanked consumers.
According to the Grab-Singtel consortium’s CEO, Mr. Charles Wong, they hope to serve their target market through “personalised, accessible, and trusted financial products” that will be “powered by our next-generation cloud technology and data platform.”
Similar sentiments were echoed by Mr. Forrest Li, chairman and group CEO of Sea, who emphasised that they wanted to “better the lives of consumers and small businesses through technology” and address the “underserved financial needs of young consumers and SMEs in Singapore.”
As more and more in funding is poured into fintech in Southeast Asia, which reported a CAGR of 55% in equity funding, SMEs can look to fintech to fulfil existing financing gaps, such as not being paid on time, being unable to secure sufficient funding, a lack of understanding in trade financing, and inadequate cash flow management.
Just like how the Singaporean financial sector has embraced fintech in its bid to remain a top financial centre, SMEs will have to explore fintech solutions if they want to continue to drive long-term sustainable, and inclusive growth. And with the recent digital bank licenses awarded, SMEs are sure to have a wider array of options and services to meet their needs.
ALTIOS looks forward to the roll out the newly created digital banks and helping small to medium size Fintech companies to strive in the region from the strategy to the implementation.
The full article, as reported by Fintech News SG, can be accessed here
While ASEAN’S heavy dependence on tourism and external demand growth have hurt it in 2020, its GDP is sprojected to rebound at a higher rate than the rest of the world (6.2% vs. 5.2% YoY) which is a positive for the region.
ALTIOS shares the implications for its clients and for regional opportunities.
Unsurprisingly, the COVID-19 pandemic has had widespread ramifications on the performance of equity markets all around the world. The pandemic has led to noticeable trends in performance in Asia, as the strongest performing markets have been those who have contained new COVID-19 infections the best, those able to provide significant government cash injections, and those less affected by weak tourism and export demand.
Yet, variations in equity market performances within Asia and ASEAN have not dampened expectations for the equity market in 2021, as all equity markets across ASEAN have recovered to pre-Covid year highs (albeit within the 10-20% range).
Another positive for ASEAN is the strong rebound in raw materials and industrial metal prices; China’s strong demand will be a key factor in the rebound of intra-Asian trade growth, and its evolving manufacturing sector can only continue to bolster the ASEAN equity market.
Finally, recently signed Regional Comprehensive Economic Partnership Agreement should end up being a positive for ASEAN equities which are often used as leverage in regional trade.
ALTIOS believes that the aforementioned factors point to many opportunities for investors interested in Asian equities, especially agile ones that can pivot to the sectors with the greatest growth in the eventual post COVID-19 environment: technology, consumer staples, utilities, and healthcare. Investors can also look to rebounding sectors, like industrials and financials, for buying opportunities.
While the business and financial landscape may have been disrupted by the pandemic, ALTIOS looks forward to helping their clients plan their futures and navigate the enticing opportunities that a rebounding market is sure to offer.
The full article, as reported by Asia Fund Managers, can be accessed here.
Altios shares our take on the RCEP and what this means for us and our ecosystem.
The Regional Comprehensive Economic Partnership (RCEP), said to be the biggest trade agreement to date, extends existing trade agreements signed between the ten countries of ASEAN (Singapore, Indonesia, Philippines, Vietnam, Malaysia, Thailand, Laos, Myanmar, Brunei, Cambodia ) and combines them into a multi-lateral agreement with Australia, New Zealand, South Korea, Japan and China. This deal represents around 25% of global international trade and 30% of the global GDP in value, reaching population of 2.3 billion individuals.
Details of the deal have not been published yet but will include bilateral tariffs, import taxes reductions, less constraints on FDIs, ease on regulatory aspects to export and/or invest within the RCEP area, and strengthen regional supply chains. These clauses will be greatly applicable in areas such as trading, e-commerce, intellectual property, test certifications, and technological cooperation.
The deal aims to promote multilateralism and free trade in Asia, and balance trade exchanges within the region. Some may also argue that this is a geopolitical move on China’s end to send a strong signal to the U.S.
There are however still some questions left unanswered: will India give in and sign the agreement and how will Australia-China trade relations develop in the future? India had pulled out of negotiations last year but RCEP members said they remained open to India’s accession later. The country is currently protecting its domestic industry as lower tariffs could impact local producers, especially those in agriculture.
As for Australia and China, experts says the RCEP won’t make any difference regarding trade tension between Australia & China, and we will have to wait for further detailed measures to judge since tariffs between two countries are already low.
ALTIOS believes that the RCEP would greatly help their clients due to the further strengthening of the Asia’s position as the global economic center of gravity and development of intra-Asian trade. This will give more accessibility to regulated or highly taxed industry sectors in China, sign that China is opening up to multilateralism. Furthermore, this will create opportunities for strong national industries in the region like cosmetics and F&B in Australia and promote these industries within the RCEP region. Country specifications can be organized to optimize regional trade, as China will open up to import more food and commodities providing great opportunity for ASEAN countries, and also open up its automotive sector, which is promising for Japan and Korea.
The full article, as reported by the Financial Times, can be accessed here.
Altios gives its highlights on the opportunities the EVTA is bringing to the Southeast Asian Region.
Signed on 8 June 2020 and effective since August, the EU-Vietnam Trade Agreement (EVTA) makes Vietnam the second Southeast Asian Nation after Singapore, to have such a trade agreement with the European bloc.
Business opportunities look optimistic for both the EU and Vietnam, with a good percentage of goods exported from both parties to be duty-free. This is especially attractive for multinational manufacturers outside the EU, with manufacturing imports from Vietnam to the EU expected to increase.
Companies looking to expand into Southeast Asia would be met with a nurturing trade environment, despite the ongoing disruption that the Coronavirus pandemic has brought upon International trade.
Access the full article here as reported by the Financial Times.