Buffett Indicator: Singapore Stock Market Valuations and Expected Future Returns

Country: Singapore (updated daily) check out Global Overview for detailed methodology.

The Stock Market is Significantly Undervalued.

Ratio of total market cap over GDP: Recent 20 Year Maximum - 509.62%; Recent 20 Year Minimum - 153.89%; current - 184%
Expected future annual return: 13.1%

ETF Used for dividend yield: EWS (Yield=3.74%)
Market Index used: Straits Times Index
Current Annual GDP: $383 billion US dollars or 508 in billions of national currency (GDP in Local Current Prices Annual Growth=3.68%)
Data since year 1987

Singapore Historical GDP Growth

Historical GDP of Singapore in billions of national currency. The GDP in local current prices has grown at the annual rate of 3.68% over the past 8 years. Please note this growth rate includes the effect of price inflation and it is NOT the real GDP growth rate. Current Annual GDP: $383 billion US dollars or 508 in billions of national currency.

Historical Stock Market Cap

Historical total market of Singapore in billions of national currency. This value is normalized using the data published by WorldBank. Straits Times Index is used for the normalization. It tracks the performance of the top 30 companies listed on the Singapore Exchange.

Historical Ratio of Total Market Cap over GDP (%)

The current ratio of total market cap over GDP for Singapore is 184%. The recent 20 year high was 509.62%; the recent 20 low was 153.89%. If we assume that the ratio will reverse to the recent 20 years mean of 286.56% over the next 8 years, the contribution to expected annual return is 5.69%. This is the detailed historical chart of the ratio.

Based on these historical valuations, we have divided market valuation into five zones:

Ratio = Total Market Cap / GDP	Valuation
Ratio ≤ 201%	Significantly Undervalued
201% < Ratio ≤ 258%	Modestly Undervalued
258% < Ratio ≤ 315%	Fair Valued
315% < Ratio ≤ 373%	Modestly Overvalued
Ratio > 373%	Significantly Overvalued
Where are we today (2021-02-25)?	Ratio = 184%, Significantly Undervalued

Predicted and Actual Returns

From the equation presented on the U.S. market valuation page,

Investment Return (%) = Dividend Yield (%) + Business Growth (%) + (Re/Rb)(1/T)-1

We can compute the predicted and actual returns of the Singapore stock market over a given time period, T. In the calculation, we set T to equal eight years, the approximate length of a full economic cycle. The calculated results are presented in the chart below. The green line indicates the expected, or predicted return if the market ratio trends near the recent 20 years average ratio of 286.56% over the next eight years.

The blue line indicates the actual, annualized return of the Singapore stock market over eight years. We use “Straits Times Index” to do the actual return calculation. We can see the calculations largely predicted the trend in the stock market as the blue line is closely parallel to the green line.

Conclusion

The stock market of Singapore is expected to return 13.1% a year for the coming years. This is from the contribution of economic growth in local current prices: 3.68%, Dividend Yield: 3.74% and valuation reverse to the mean 5.69%.

This is the projected return of the stock market in Singapore relative to other countries. Click on each bar in the chart to go to other countries:


You can go here to see what international stocks Gurus are buying.