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Singapore an oasis of stability in volatile Asia

Lex is a premium daily commentary service from the Financial Times. It helps readers make better investment decisions by highlighting key emerging risks and opportunities.

Sling money into Singapore in the past few years, and you would have watched it go nowhere while its neighbouring markets soared on the back of good growth and cheap money. But if the volatility linked with Federal Reserve plans to taper quantitative easing continue, then the developed market among the former emerging market darlings is worth another look.

Old hands could be forgiven for skepticism: in five years, the Straits Times index has gained less than a sixth, paling next to the 60 per cent in Malaysia and not on the same scale as the doubling in Jakarta and Bangkok or the near-trebling in Manila. So far this year, the index is up 2 per cent, undershooting its regional rivals. At least it is not then a market struggling to meet high expectations. Blue-chips trade at 15 times this year's forecast earnings – a smidgen above average. Relative to book value, the index, at 1.5 times, is far cheaper than rivals. Even Kuala Lumpur, another so-so performer, is trading at half as much again while Jakarta or Manila are double.

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Even surprisingly strong growth data has yet failed to excite the market. Gross domestic product jumped 3.7 per cent annually in the second quarter – its best rate in two years. Even stripping out one-offs, the data were strong enough to prompt some GDP upgrades. And yet expectations for earnings per share growth this year are anaemic at 1 per cent, according to Citigroup, compared with 18 per cent for Thailand and 15 per cent in Jakarta. That suggests others will take the brunt of revisions if any are to be made. Volatility across the region has leapt since mid-May when Fed concerns came to the fore. But Singapore's is still half that of similarly-sized Jakarta and Bangkok. Sure, the city state is not the next hot market, but for those looking for a cushion against taper-on, taper-off turbulence, it is worth a look.

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