The fundamentals have gone a long way toward explaining why Singapore stocks have struggled

While people are talking about how AI is going to kill these data-related companies, I saw this graph pop up in one of our internal discussions:

This is a graph of the Straits Times index from 2000 to 2026 (green), overlaid with the weighted average of earnings per share (EPS) – twelve months ahead (orange) and divided by the other (cyan).

If you look at the green line, you’ll see that the Singapore stock market is going through quite a challenging period from 1999 to 2003, where we had to deal with a US recession, the Asian financial crisis, the Dot Com crisis and SARS, all piled on top of each other. That still feels like the most challenging phase to me and every time people say, “I don’t think you can pile a lot of junk on top of each other at once.” I would think about this LOL.

Then we have a pretty good period, helped by how well China has done.

Since 2008, the Singapore market has gone nowhere and only returned to its peak in 2025.

That’s 17 years.

I would like to caution that the Straits Times Index is not a total return, meaning it doesn’t take dividends into account, but I think even if you add that in, it still takes a long time to come back.

I just find that different people have different frames when discussing a particular area like Singapore. Those who invested mainly in 2018 may have a better experience than those who invested heavily in 2008. This is no different than talking about the real estate market.

I heard different morals when talking to people who bought their properties in 2013 versus 2018 sometime in 2020.

Your experience is different.

Fundamentals explain why a region’s performance is the way it is. It is not without region.

Straits Times Earnings per share growth versus price.

The orange line shows the estimated future earnings per share in twelve months.

If we take the expected earnings per share for the next twelve months from each of the index components and put them together, you get a chart like this.

While you may wonder how accurate the forward consensus estimates are, there are positive aspects to them as well.

1. If your company didn’t do well, but probably performed better because of what you said in the quarter, earnings per share will look better. This should show everyone that you will make more profits.
2. The current price of something is an aggregate of FUTURE cash flows, discounted by a threshold value. You always try to see how expensive or cheap something is, not about what it has done in the PAST, but about the FUTURE.
3. While we can say that analysts and bosses can be overly optimistic, looking at such a chart can adjust over time.

You can go out and see how easy it is to find this data. We got access to this not too long ago. Are you a customer of Provided and end up liking this post after reading this. Send me an email or message me and I can see if our investment team can do more content like this.

Okay, the pink box highlights a period when earnings per share were struggling. You realize that the orange EPS line moves the same way as the green line.

I would say that if the price falls, it indicates that the EPS is going to fall.

If the price increases, it indicates that the EPS will increase.

Not always, but if you look at it over a period of 17 years, you can see it.

The price is an aggregate of future cash flows and in retrospect, the Straits Times’ future cash flows were volatile and going nowhere.

I think you know that the MSCI World did quite well during the period from 2010 to 2020 when earnings per share struggled, so here are the earnings per share of the MSCI World and the MSCI Emerging Market:

This chart shows earnings per share for the MSCI World and Emerging Markets over a long period of time. We have more data if this is this. This is a rolling EPS rather than a forward EPS, but you can see that when you look at it over a time series it matters less.

MSCI Worlds’ trailing EPS went through the same ups and downs, but EPS ended up higher. In contrast, MSCI Emerging Markets’ EPS trailing performance has also been in the same rut as in the Straits times, and you also know that the Emerging Markets’ performance over that period has not exactly been great.

So where does Straits Times, MSCI World and Emerging Markets earnings per share go to Kyith?

Beats me.

My job is to tell you that there is a fundamental basis for the performance of these things, so that you can focus more on the question: Are earnings per share really going up over the longer term?

Price leads EPS

I always said I would wait until the fundamental data conclusively showed me that earnings are visible.

But that usually doesn’t work very well.

I’m getting confusion as to why the price is running for no reason.

Then I realize that price… is the best indicator of future performance. Not always, but the market consistently tries to price in what it is like.

I’ve highlighted a few pink boxes and you can look at the green and the orange lines. Generally, the green lines lead the orange lines, indicating that price leads fundamentals.

For example, the price starts to rise in 2008 before the EPS shows up. It is easier to see on such a chart, but from day to day without such an EPS chart you will be even more confused as to why the price is rising!

However, there will be a lot of whiplash, and this is because market consistency is trying to appreciate things.

The strangest one is the last pink box. You see a huge increase in EPS, but the price (green line) went nowhere. But in a sense, the price could indicate that earnings per share growth is taking a breather.

What we see is that earnings per share appear to be going higher.

Or does it go back into the trash?

That’s a topic for another day, but now you might be wondering more about the basics.

It also kind of tells you that if earnings per share are generally higher over the long term, I don’t think the price can be under pressure for too long.

What about the rating?

The cyan line takes the price dividend by the future EPS and shows the index’s valuation at that point:

I have drawn lines to show the historical valuation range that the Straits Times index is trading at, which is about 11 to 14 times over the past 17 years.

If we reverse PE of 11 and 14, we get 9% and 7%.

We can think of this as the Straits Times earnings yield if we invest long enough (maybe 15-25 years).

In a way without a lot of earnings per share, it doesn’t mean you have no returns. If we have a long time horizon, we can achieve a certain return. The question is whether the majority of companies properly return the money to shareholders in the form of share buybacks or dividends.

If most stocks aren’t shareholder friendly (perhaps like they have been for the past decade), then having a good earnings yield doesn’t help either.

In general, markets go through ebbs and flows and the market becomes cheaper or more expensive. But sometimes there are reasons for that.

We haven’t seen earnings per share rise to a higher plateau for a while.

I have a longer chart showing the MSCI Singapore index, a more concentrated index:

This is also forward EPS, and you can see that next to two different things:

1. Where earnings per share were in the early 1990s and how crazy earnings per share growth was from 2003 to 2008 compared to history.
2. That the MSCI World can actually trade at a higher valuation.

Should we be concerned in some sense if the PE valuation is not cheap?

It means approximately:

1. The market has priced in good gains.
2. If earnings surprise even higher than what is priced in, the Straits Times Index could rise.
3. If earnings disappoint more, prices would struggle.

The price of a basket of securities over the long term is determined by fundamental factors, and I hope I showed you that in today’s short exercise.

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Kyith is the owner and sole writer behind Investment Moats. Readers tune in to Investment Moats to learn and build stronger, more solid wealth foundations, how to pursue a passive investing strategy, learn about investing in REITs, and the basics of active investing.
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Kyith worked as an IT operations engineer from 2004 to 2019. He currently works as a Senior Solutions Specialist at Fee-only Wealth Advisory Firm Providend. All opinions expressed on Investment Moats are his own and do not represent the views of Providend.
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