- Indian startups often choose Singapore as their place to incorporate.
- Singapore is also a hub for many Indian investors.
- The Comprehensive Economic Cooperation Agreement (CECA), signed in 2005, encourages investment.
- Would-be investors can consider real estate, equities or ETFs.
Singapore is a major economic hub for Asian businesses, thanks to the Comprehensive Economic Cooperation Agreement (CECA) and tax-friendly policies. This means many innovative companies choose to incorporate into the city-state. If you are an Indian looking to build a diverse portfolio of investments, adding Singapore businesses or funds to your existing domestic portfolio offers some relatively low-risk opportunities for economic growth.
Indian Investors Can Find Growth Opportunities in Singapore
Singapore has traditionally been a hub for IT and telecommunications companies. Those sectors still offer massive growth opportunities, and many Indian companies have their headquarters there. Singapore is home to many big brands, including Tata Communications, TCS and Quest Global. There are opportunities outside of those sectors, too. Singapore’s location makes it a gateway to other Asia-Pacific countries, so brands looking to expand their reach are well-positioned to do so when they build a presence there.
What Is the Comprehensive Economic Cooperation Agreement (CECA)?
In 2005, India and Singapore signed a bilateral Comprehensive Economic Cooperation Agreement (CECA). This agreement boosted trade between the two countries. India has trade agreements1 with 26 countries, giving it the opportunity to benefit from economic activity all over the world. The proximity of Singapore to many Asia-Pacific countries and its focus on growth and innovation combined with low tariffs and generous tax policies make it an appealing place for high-growth companies in all sectors.
Why Invest in Overseas Assets?
If you are planning for your retirement or saving for a goal that is at least five to 10 years away, investing in a diverse range of equities is a good idea. Many Indians start their portfolios by investing in the NIFTY 50 or other domestic indexes through Exchange Traded Funds (ETFs). This is a simple and convenient option. However, if you focus all of your investments on the Indian markets, this puts you at risk of selling at a loss should there be an economic downturn in the domestic markets. Having some overseas investments and some safe-haven investments such as precious metals helps hedge against that eventuality.
Top Investment Opportunities in Singapore
Indians looking for exposure to Singapore’s markets can choose from a variety of products, including savings bonds, real estate and ETFs. There’s also the option for knowledgeable investors to purchase shares in specific companies operating in the country. If you are a retail investor who simply wants to add some Singapore equities to your portfolio, choosing an ETF makes sense as an affordable and relatively simple way of doing this. Bonds have lower yield potential; however, they are the lowest risk option and are good for those investing on a medium time scale.
Straits Times Index ETFs
The Straits Times Index ETF2 monitors the top 30 Singapore Exchange businesses. It is the most well-known Singapore ETF. This option was first made available in 2002, and over the last ten years, it has averaged returns of around 4.5%. This ETF tracks the underlying assets quite accurately and conveniently allows Indian investors to get involved with the Singapore markets. The fund reviews the businesses it includes regularly but can include companies in the financial sector, real estate, telecoms, and energy.
Singapore Savings Bonds
Singapore Savings Bonds are 10-year bonds issued by the government. These bonds are incredibly low risk but offer relatively low returns, typically about 1.45%. Bonds do not usually make up a large amount of a younger person’s portfolio, but many Indians approaching retirement age choose to redistribute their investments to have a heavier weighting toward bonds, accepting the lower returns for a reduction in the risk of unforeseen events wiping out the value of their portfolio.
Singapore Real Estate
Real estate investing requires some capital to get started with but can offer steady returns, both in the form of rental income and the value appreciation of the underlying asset. Investing in foreign real estate carries with it more risk than investing in domestic real estate since the would-be investor must learn about local laws, and it’s harder to do due diligence. One option is to use real estate investment trusts3 rather than buying properties directly.
Business Franchises in Singapore
Indians with particularly strong knowledge of a specific sector sometimes decide to invest in what they know well. Franchise opportunities allow those with capital to take advantage of an existing brand’s name and reputation and open up a business branch in a new area. Most franchises offer help with business planning, suppliers and branding to ensure all branches provide customers with the same level of service and quality. Singapore is a thriving economy that offers lots of opportunities for would-be franchisees to expand.
Singapore’s Tax-Friendly Policies for Businesses
Singapore has tax-friendly policies for both investors and businesses.4 There are many government grants, tax rebates and tax exemptions for startups and growing SMEs. These incentives encourage innovative companies to establish headquarters in the city-state. Indian investors who feel comfortable having a portion of their portfolio in smaller or mid-cap companies may find many interesting ventures to consider because of this. The Research, Innovation and Enterprise Plan5 aims to invest S$3 billion over a three-year period in stimulating the city-state’s economy.
How Much Foreign Investment Does a Portfolio Need?
Financial advisors typically recommend investors put between 15 to 25% of their funds into foreign stocks. The exact amount depends on several factors, including:
- The investor’s level of risk aversion.
- The size of the portfolio.
- The timeline for drawing down on the investment.
- The countries the investor is considering.
Some conservative investors may allocate only 5 to 10% to foreign stocks and a similar percentage to bonds or commodities, with the rest going to domestic equities. Talk to your financial advisor for personalized guidance.
ETFs vs. Individual Companies
ETFs help investors get exposure to several assets within a specific class, such as equities or commodities. Some ETFs cover a specific index, others a sector. Investing in an ETF takes away the burden of doing due diligence on specific companies. This makes ETFs a good choice for those who don’t have a lot of knowledge about the market they are investing in and those who simply don’t have the time to do that research. Singapore ETFs help investors get exposure to the country’s economy without requiring local knowledge.
Seek Advice Before Making Large Investments
Whether you are just getting started with wealth building or are looking to diversify an already well-developed portfolio, it is important to understand the financial products you are buying. Seek advice from a professional wealth advisor who understands your personal circumstances. No online resource can fully address the subject of investing. Having a trained advisor look at your goals, income and timescales is the best way to ensure the assets you invest in are suitable for your needs. There is an element of risk with all assets, and the right financial planner can assist you with finding investments that suit your risk profile.