How To Profit From Asia’s Overachiever

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

This city-state, with a population half the size of Manhattan, was ranked the #1 information technology savvy country in the world in 2005; the #1 most competitive economy in Asia; the #1 country in Asia for intellectual property rights protection; and the #3 Asian securities market for transparency and regulation.

With a real GDP growth of 7.7% in 2006, Singapore was the third-fastest growing economy in the world. Throw in Singapore’s very low levels of corruption, a skilled workforce, a stable environment, and an efficient infrastructure and you see why this ultra-sleek, city-state continues to rank among the very best performing global economies by virtually any measure.

Not that it’s been clear sailing for Singapore over the past decade. Since the 1997-98 Asian financial crisis and the sudden downturn in world trade in 2001-02, the government has intensified its efforts to nudge Singapore away from traditional manufacturing toward a "knowledge-based" service economy. Central to this strategy has been the government’s promotion of Singapore both as a high-end tourist destination and as "Asia’s Switzerland."

Last year, the government awarded casino licenses for the first time ever. U.S.-based Las Vegas Sands and Malaysia’s Genting are spending $6.5 billion to build two mega-casinos that are expected to be a significant boon to Singapore’s economy over the next decade. Indeed, many credit Singapore’s recent strong economic performance to a significant jump in tourism and shopping. Tourist arrivals hit a record 9.5 million in 2006 and are targeted to almost double to 17 million by 2015.

Singapore’s legal system, political stability and high living standards have made it a financial hub for Southeast Asia. As a result, Singapore has become the world’s fastest-growing offshore banking center. Money is pouring in from Indonesia, the Philippines and Malaysia — especially from the well-off, "non-resident Indians" who are scattered across the region. The country’s $21 billion financial services industry already accounts for 11% of its GDP — and this is only set to grow.

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So how best to profit from Singapore’s economic achievements? The iShares Singapore ETF (EWS). Singapore’s booming financial sector has the largest sector weighting with around 36% and includes otherwise inaccessible names like DBS Group Holdings, Ltd., United Overseas Bank, Ltd., and Oversea-Chinese Banking Corp. The telecom weighting of 12.6% consists solely of Singapore Telecom, Southeast Asia’s largest telecom operator, which itself holds stakes in its counterparts in the Philippines, India, and Thailand.

So buy the Singapore ETF (EWS) today at market and place your stop at $10.50. There are no options on this one.


Four out of five of our stock positions are profitable, with both Millicom and Telefonica showing 20%+ gains. Millicom International (MICC) continues its relentless path upward and is now up almost 70% since our initial recommendation. Move your stop to $60.50.

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