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Is Singapore ETF in Trouble Amid Surging Coronavirus Cases?

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The coronavirus pandemic has infected more than 2.5 million globally. The outbreak has also resulted in a death toll of at least a glaring 177,000 worldwide. Singapore, which was being appreciated for its control on the outbreak during the initial stages, now seems to be struggling with the second wave of infections. Since Mar 15, the city-state’s number of confirmed coronavirus cases has surged from 200 to more than 10,000 (as of Apr 21). Singapore is believed to be having the highest number of cases in south-east Asia.

Low-wage migrant workers make for around 60% of Singapore’s COVID-19 case count, per a Guardian article. They form an integral part of city-state’s workforce. It is being speculated that the surge in cases in Singapore is coming majorly from crowded dormitories where migrant workers live.

However, the Singapore government has quarantined several dormitories and is increasing COVID-19 testing for all workers. The government has also extended the lockdown period that had begun at the start of April, to Jun 1, which otherwise was scheduled to end on May 4.

Coronavirus Impact on Economy

The pandemic’s impact is pronounced on Singapore’s first-quarter GDP data. The city-state’s GDP contracted 2.2% year over year (the highest since the 2009 financial crisis), per a Reuters’ report. The metric compares unfavorably with economists’ expectations of a 1.5% decline. Singapore’s GDP declined 10.6% on a quarterly basis (the lowest since 2010), lagging analysts’ expectations of a 6.3% decline, per a Reuters’ report.

It’s industrial output also shrank 22.3% in February on a monthly basis, in comparison to expectations of a 11.5% decline, per a Reuters’ report. Notably, the Ministry of Trade and Industry expects the Singapore economy to contract 1-4% this year, in contrast to the initially forecasted range of -0.5% to 1.5%, per a CNBC article. According to the ministry, the downward revision in economic forecast was mainly due to “the weaker-than-expected performance of the Singapore economy in the first quarter, and the sharp deterioration in the external and domestic economic environment since February,” per a CNBC article. However, in order to combat the outbreak, Singapore has introduced stimulus packages worth more than S$60 billion, according to a Bloomberg article.

Meanwhile, economists at Citigroup Inc. believe that Singapore can see a deeper recession in 2020 due to its measures of extending and tightening the partial lockdown undertaken to contain the outbreak, per a Bloomberg article. According to economists Wei Zheng Kit and Kai Wei Ang, Singapore’s economy will shrink 8.5% in 2020, in comparison to the previous estimate of a 6% contraction, per a Bloomberg report. In this regard, they said that “the circuit breaker would cause close to 25%-30% of GDP to come to a standstill, with every month of extension further reducing 2020 GDP by 2% to 2.5%” (per a Bloomberg article).

Against this backdrop let’s take a look at the following ETF:

iShares MSCI Singapore ETF (EWS - Free Report)

The fund provides exposure to large and mid-sized companies in Singapore and tracks the MSCI Singapore 25/50 Index. It holds a basket of 25 stocks and charges a fee of 50 basis points. It has an AUM of $407.1 million. The fund trades in daily average volumes of about 776,000 shares. It has a Zacks Rank #3 (Hold) with a Low risk outlook (read: Coronavirus Puts These Country ETFs on High Alert).

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