The Smart Investor
    Facebook Instagram
    Wednesday, October 4
    Facebook Instagram LinkedIn
    The Smart Investor
    • Home
    • About
      • About Us
      • Careers
    • Smart Investing
      • Getting Started
      • Investing Strategy
      • Smart Analysis
      • Smart Reads
    • Special Free Reports!
    • As Featured on BT
    • Our Services
      • Our Services
      • Subscribe now!
    • Login
    • Cart
    The Smart Investor
    Home»Blue Chips»Singapore Could Be in a Recession in 2023, Should You Sell Now?
    Blue Chips

    Singapore Could Be in a Recession in 2023, Should You Sell Now?

    What's the wise thing to do with your investment portfolio if a recession is heading its way here soon?
    Royston YangBy Royston YangMay 25, 20224 Mins Read
    Facebook Twitter LinkedIn Email WhatsApp
    Share
    Facebook Twitter LinkedIn Email WhatsApp

    Singapore has handled the pandemic well, thanks to the decisive actions and economic support from the government.

    However, Prime Minister Lee Hsien Loong has recently warned that Singapore should be prepared for more economic challenges ahead.

    Singapore’s core inflation has hit 3.3% in April, a decade-high, and global growth may become weaker with the advent of the Russia-Ukraine war and supply chain disruptions.

    A recession could be on the cards within the next two years, he cautioned.

    An economic downturn is bad news for businesses as it signals lower demand for goods and services, thus crimping revenue and profits.

    As an investor, there’s the prospect of your investments reporting poorer earnings while also paying out fewer dividends.

    What’s the best course of action?

    Should you sell now before things get worse, or hold on to your positions through the recession?

    Getting it right, twice

    It’s tempting to sell out now and then decide to buy again when stocks become much cheaper.

    The idea certainly sounds simple, but the execution is anything but easy.

    First off, you have to determine if share prices are indeed going to continue plunging should economic conditions worsen.

    Assuming they do, you then need to decide when to jump back in again once the recession is over.

    In short, you need to get it right not once, but twice.

    If you sell your entire portfolio now and sit in cash, it’s tough to know exactly when to start dipping your toes back in.

    Many investors have missed the boat completely and been left high and dry when share prices suddenly surge.

    Remember that the stock market is never entirely in step with the economy, with share prices usually moving ahead of the economy by three to six months.

    Hence, predicting when share prices are going to recover is, at best, a wild guess.

    As the saying goes — time in the market is a better strategy than timing the market.

    Of course, this strategy of staying in the market works best if you’re vested in strong and stable businesses, which brings me to my next point.

    Been there, done that

    Not all businesses experience the same effects from an economic downturn.

    Larger, diversified blue-chip businesses have a better track record of getting through recessions relatively unscathed.

    Companies that have a strong competitive edge and generate healthy amounts of cash flow also stand a better chance of survival.

    Take bourse operator Singapore Exchange Limited (SGX: S68), or SGX.

    The group has a natural monopoly and has continued paying out dividends through the Great Financial Crisis in 2008-2009.

    Conglomerates such as Keppel Corporation Limited (SGX: BN4) and Haw Par Corporation Limited (SGX: H02) have also weathered crises before without being adversely impacted.

    And let’s not forget Singapore’s largest bank, DBS Group (SGX: D05).

    The lender has gone through numerous economic cycles and has grown stronger through the years, reporting a record profit for its latest fiscal 2021.

    Dividends continue to flow

    History has shown that many companies, including REITs, can continue to pay out dividends even through a recession.

    Having a robust business model, quality assets and competent management are important attributes for such businesses.

    Both Suntec REIT (SGX: T82U) and Parkway Life REIT (SGX: C2PU) continued paying out distributions throughout the GFC, and also during the previous recession in 2020.

    Vehicle inspection company VICOM Limited (SGX: WJP) has also continued paying out dividends throughout 2008-2009, and for 2020 and 2021.

    Get Smart: Don’t be rash and have enough cash

    The advice here is not to act rashly and sell out your portfolio in a panic.

    As unpleasant as they are, recessions are a common feature of mature economies and the government also stands ready to support the economy and livelihoods should conditions deteriorate further.

    The last two years have shown us what the government is ready to do to help the economy as it drew on S$37 billion in reserves to keep up public health expenses.

    If you build a portfolio of strong companies with rock-solid business models and good prospects, you need not worry too much.

    However, you do need to ensure you have sufficient cash to tide through the recession.

    It’s also useful to keep extra cash handy to take advantage of attractive opportunities should stock prices get even cheaper.

    This could be the fastest way to jump from a “newbie” investor to a seasoned pro. Our beginner’s guide shows everything you need to know to buy your first stock and beyond. Click here to download it for free today.

    Follow us on Facebook and Telegram for the latest investing news and analyses!

    Disclaimer: Royston Yang owns shares of DBS Group, Singapore Exchange Limited, VICOM and Suntec REIT.

    Yahoo
    Share. Facebook Twitter LinkedIn Email WhatsApp

    Related Posts

    Century Square

    If I Had S$20,000, Here Are 4 Singapore REITs I Will Buy

    October 4, 2023
    (RY) Sheng Siong Dakota Breeze

    Sheng Siong’s Share Price Has Tumbled to a 52-Week Low: Should Investors Get Worried?

    October 4, 2023
    (TSI) dividends 2

    4 Singapore Companies Paying Dividends in October

    October 3, 2023
    Facebook Instagram LinkedIn Telegram
    • Careers
    • Disclaimer & Privacy Policy
    • Subscription Terms of Service
    © 2023 The Smart Investor. All Rights Reserved. The Smart Investor, thesmartinvestor.com.sg, an investment education website managed by The Investing Hustle Pte Ltd (Company Reg No. 201933459Z) is not licensed or otherwise regulated by the Monetary Authority of Singapore, and in particular, is not licensed or regulated to carry on business in providing any financial advisory service. Accordingly, any information provided on this site is meant purely for informational and investor educational purposes and should not be relied upon as financial advice. No information is presented with the intention to induce any reader to buy, sell, or hold a particular investment product or class of investment products. Rather, the information is presented for the purpose and intentions of educating readers on matters relating to financial literacy and investor education. Accordingly, any statement of opinion on this site is wholly generic and not tailored to take into account the personal needs and unique circumstances of any reader. The Smart Investor does not recommend any particular course of action in relation to any investment product or class of investment products. Readers are encouraged to exercise their own judgment and have regard to their own personal needs and circumstances before making any investment decision, and not rely on any statement of opinion that may be found on this site.

    Type above and press Enter to search. Press Esc to cancel.