Introduction to Singapore Sector Performance and Risk Analysis Framework
Curious about your sector’s journey within Singapore’s economy? Uncover insights on sector performance and risk assessment with us as we guide you through an exploration of Singapore’s economic landscape.
In this post, we take a look into the various performance and risk metrics to help understand each sector’s evolution over time. Here, we evaluate sector returns through Profit Before Tax (PBT), Returns on Assets (ROA), and Returns on Equity (ROE) – these are the lenses through which we’ll examine each sector’s story. Let us unveil how sectors have shaped and adapted, especially through the COVID-19 pandemic.
As with any performance measure, we will need to balance our perspective with the associated risks inherent in each sector. In this article, we shall provide broad liquidity and risk benchmarks for each sector as well.
Annual Sector Performance Analysis
How have the various sectors in Singapore performed over the years? In the sections below, we shall explore various sector performance metrics over time based on publicly available data as provided by the Singapore Board of Statistics.
Annual Profit Before Tax (by Sector)
Source: Singstat (2021)
Annual Profit Before Tax (PBT) was used as a proxy for sector profitability. While not a perfect measure of sector performance given that PBT ignores financing cost and corporate tax expenses, it is nevertheless useful to evaluate historical trends over time.
The Financial Services sector has historically been the a contributor to Singapore’s economy, and has increased its significance to the economy since 2009, with the global economic recovery post the 2008-2009 subprime mortgage crisis. A persistently low interest environment further spurred investment activities and asset prices.
The Wholesale & Retail Trade sector has also increased in significance since 2009, and can be attributed in part to the rise of ecommerce both globally and in the local landscape.
The e-commerce landscape in Singapore started to experience significant growth and attention around the mid-2010s. The increased availability of high-speed internet, improvements in logistics and payment systems, and the proliferation of smartphones played a crucial role in driving e-commerce adoption.
Key factors that contributed to the e-commerce boom in Singapore include:
Improved Infrastructure: The expansion of reliable internet connectivity and the development of user-friendly online platforms made it easier for businesses to set up and operate online stores.
Mobile Penetration: The widespread adoption of smartphones allowed consumers to access e-commerce platforms on the go, which contributed to the growth of mobile shopping.
Digital Payment Solutions: The availability of secure and convenient digital payment methods facilitated online transactions, reducing barriers for consumers to shop online.
Government Support: The Singaporean government actively supported the growth of e-commerce by implementing policies that encouraged digital innovation and entrepreneurship.
Global Trends: The global shift toward online shopping and the influence of major international e-commerce players also impacted the local market.
Manufacturing sector has remained largely constant between 2009 and 2017, only to rebound sharply since then, partially attributable to the following factors:
Global Economic Growth: 2017 was marked by a synchronized global economic expansion, with many major economies experiencing robust growth. This improved global demand for manufactured goods, boosting Singapore’s manufacturing sector, which is export-oriented.
Electronics Manufacturing: The electronics manufacturing sector, a significant part of Singapore’s manufacturing landscape, saw strong growth in 2017. This could be attributed to the growing demand for electronics components and products, including semiconductors and consumer electronics.
Semiconductor Boom: The semiconductor industry, in particular, had a positive year in 2017. Increased demand for microchips and semiconductor products, driven by trends in technology, such as the growth of smartphones and the Internet of Things (IoT), contributed to the sector’s profitability.
Advanced Manufacturing Technologies: Singapore has been actively adopting advanced manufacturing technologies, such as automation and Industry 4.0 practices. These technologies enhance productivity and efficiency, resulting in improved profitability for manufacturing companies.
While the Real Estate sector has also seen strong growth from 2009 to 2010 in the recovery year the post Global Financial Crisis (Subprime Mortgage Crisis), profit before tax has seen declines since 2010.
Possible factors driving general declines in sector Profit Before Tax are as follows:
Regulatory Cooling Measures: The Singaporean government introduced a series of cooling measures in the residential property market to curb excessive price growth and speculation. These measures, which include Additional Buyer’s Stamp Duties (ABSD) and loan-to-value (LTV) limits, are aimed at deterring property investors and reducing transaction volumes, affecting developers’ sales and profits.
Global Economic Uncertainties: The period from 2010 onwards was marked by global economic uncertainties, including the aftermath of the global financial crisis and subsequent Eurozone debt crisis. Such uncertainties could have affected investor sentiment and dampened demand for real estate investments.
Market Saturation: Increased competition resulting from a prolonged period of cheap debt, with the Singapore overnight interest rate below 1% from 2010 through 2018, have caused certain segments of the real estate market, especially the residential property market, to become increasingly saturated over this period. An oversupply of properties led to lower property prices and rental yields, affecting the profitability of real estate developers.
The construction sector has also seen significant declines since 2012, with a combination of high construction costs and labour shortage, and subsequent reduction in sector demand.
The Information & Communications (ICT) services sector has grown significantly from 2009 to 2012. Increased competition resulted in sector profit declines thereafter.
Pre and Post Covid Sector Performance
|Period Compound Annualized Growth Rate (CAGR)
|Finance & Insurance
|Wholesale & Retail Trade
|Transportation & Storage
|Professional And Administrative & Support Services
|Information & Communications
|Accommodation & Food Services
Source: IRAS (2022)
Having evaluated the historical performance across each sector, let us understand how the various sectors have emerged emerged from the Covid-19 pandemic in Singapore.
With the emergence of Covid-19 and subsequent lockdown arrangements and border closures in Singapore between 2020 and 2021, the Accomodation & Food Service sector has been most adversely affected, followed by the construction sector, which was hit by a series of project delays amidst work closures, a lack of foreign workers and Covid outbreaks in the worker dormitories, with both sectors facing Losses Before Tax between 2019 and 2021.
Professional and Administrative Support Services was the next largest segment that was adversely impacted, with a 41% CAGR decline from 2019-2021, with a combination of reduced economic activities as companies entered a crisis/survival mode where cost centers were deprioritized; as well as flexible, work from home arrangements that made it difficult to implement and coordinate shared service arrangements.
The shift towards work from home and other flexible work arrangements during the same period, along with restricted border movement and social gatherings resulted had adversely affected the Real Estate sector across Commercial and Retail asset classes, and has in turn resulted in a proliferation of telecommunication, cloud services to facilitate remote work arrangements over the same period that has benefited the ICT sector.
The Transportation & Storage sector expanded significantly between 2019 and 2021, along with the Wholesale and Retail Trade and the Manufacturing Sector amidst a proliferation of ecommerce spending given broader lockdowns and travel restrictions.
Perhaps more surprisingly, the Financial Services and Insurance sector expanded over the period of the pandemic as well, possibly due to companies tapping on financing arrangements as a liquidity measure over the same period. The Singapore government had also implemented a series of measures to make available low interest SME Loans (e.g. SME Working Capital Loan and Temporary Bridging Loan Programme). During the same period, MAS further provided lower-cost funding to participating financial institutions to support their lending at lower interest rates to SMEs under the ESG Loan Schemes through the MAS SGD Facility.
To ease principal repayment constraints by SMEs during the pandemic period, the Singapore government further put forth a Special Financial Relief Programme for SMEs to defer 100% of principal repayments of their secured loans until the end of 2020, with a further Extended Support Scheme available to SMEs facing constraints on loan instalment repayments to defer 80% of their principal payments for fully secured term loan until 2021.
Returns on Asset (ROA)
Source: Singstat (2023)
For a brief period between 2010 and 2012, the ICT sector achieved the highest Returns on Asset (ROA). Returns have however deteriorated substantially since then, with increased competition within the sector. Since then, the Manufacturing sector had experienced the largest ROA, before being overtaken by the Transportation & Storage sector in 2021.
With increasing competition and market saturation in the Accommodation & Food Services and the Construction sectors, ROA has declined steadily since 2009, culminating in negative ROA values in 2020 and 2021.
Returns on Equity (ROE)
Returns on Equity largely mirror the same trend as Returns on Asset, magnifying the returns in the Transportation & Storage sector, largely due to substantially higher leverage taken by companies within the sector as compared to the Manufacturing sector.
Sector Risk Metrics & Benchmarks
Discover how the liquidity and leverage position of the various sectors in Singapore changed over time, and uncover the relevant benchmarks for your sector of interest below.
Debt-to-Asset Gearing Ratio
Source: Singstat (2023)
In general, Debt-to-Asset Gearing Ratio has moderated since 2008. Despite the low interest environment since 2008, Gearing ratio for the Real Estate sector (traditionally one of the most leveraged sector with a large, stable base of asset) has declined since 2011.
Amidst a low interest environment, the Singapore government and banks have gradually moderated the gearing ratio for companies and individuals, with measures such as the Total Debt Servicing Ratio (TDSR) of 60% that was introduced in June 2013 (this was subsequently revised to 55% in 2021).
The Financial Services, Construction, Manufacturing, Professional and Administrative & Support Services sectors have seen similar declines in gearing ratios over time. That said, gearing ratio within the Construction sector remains high at 68%.
On the other hand, sectors such as Accommodation & Food Services and ICT have seen an increase in leverage over time. While the Transportation & Storage sector has seen some improvement in gearing ratio amidst the pandemic between 2019 and 2021, gearing ratios have increased significantly since 2008 as well.
Source: Singstat (2023)
In terms of liquidity risk, the Manufacturing, Real Estate (post Global Financial Crisis in 2010), Wholesale & Retail Trade, Professional and Administrative Support Services and Construction sectors appear to have consistently strong liquidity.
The Accommodation & Food Services sector appears to have fairly volatile and deteriorated liquidity position over time. While the Transport & Storage sector has seen a boost in liquidity amidst the pandemic from 2019-2021, liquidity position has deteriorated significantly prior to the pandemic and presents inherent risks in the event demand tapers off for the sector.
While the current ratio for the ICT sector has still remained at an acceptable level of ~ 1.0x, liquidity position has deteriorated significantly since 2008 as well amidst increasing competition.
- Fairly resilient long-term secular trend
- Propelled by demand for ecommerce & electronic devices
- Increasing asset returns
- Lower gearing & higher liquidity
Wholesale & Retail Trading
- Fairly resilient long-term secular trend
- Propelled by ecommerce demand
- Increasing asset returns
- Consistent gearing & liquidity position over time
Accommodation & Food Services
- Most vulnerable sector in the economy
- Declining returns since 2015
- Increasing gearing ratio
- Declining and volatile liquidity position
Transportation & Storage Services
- Experienced a boost amidst pandemic
- Pre-Covid returns in staedy decline
- One of the worst performing sector in 2019 with lowest ROA
- Increased gearing ratio since 2008
- Returns likely to erode over time with inherent lack of barriers to entry
- Declining asset returns amidst market saturation
- One of the highest levered sector
- Liquidity position appears healthy for now, but may be impacted if returns remain low
Information & Communication
- Declining asset returns since 2012
- Gearing ratios have increased sharply since 2018
- Liquidity position remains borderline with current ratio of barely 1.0x
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