In a previous article, I looked at how some Singapore-listed companies may benefit Budget 2018. The themes I discussed are: Singapore’s aging population; an infrastructure boom; and the government’s future financing needs.
In this article, I will look at a few more themes and how they might benefit certain companies and exchange-traded funds, before rounding off with a bonus tip for “lazy” investors.
HDB Proximity Housing Grant
There will be changes to the proximity housing grant given to families or singles. For example, those families buying HDB resale flats to live with their parents or children will see their proximity housing grant increase. Singles who buy a resale flat to live near their parents will also get a grant. By the term “near,” it now means “within 4km” instead of “in the same town or within 2km”, which was the case previously.
Potential knock-on effect: Increased demand for resale flats to take advantage of the improved grants and relaxation of the proximity criterion.
Companies that could benefit: Local financial institutions like the banks, and APAC Realty Ltd (SGX: CLN), which operates one of the largest real estate agencies in Singapore, ERA Realty Network.
Tax Transparency for Singapore-REIT ETFs
Come 1 July 2018, the corporate tax rate of 17% will no longer be applied to distributions made by Singapore real estate investment trusts (S-REITs) to REIT exchange-traded funds (ETFs). The change will ensure the same tax treatment for investors, whether they are investing in individual S-REITs or REIT ETFs that hold S-REITs. What this means is that the distribution yields of REIT ETFs listed here would be significantly enhanced.
Potential knock-on effects: Higher public interest in REIT ETF investments, and more listings of REIT ETFs on our stock exchange.
Potential beneficiaries: REIT ETFs such as the Nikko AM STC Asia REIT ETF (SGX: CPA), Phillip APAC SGX REIT ETF (SGX: BYJ), and Lion-Phillip S-REIT ETF (SGX: CLR). Stock market operator Singapore Exchange Limited (SGX: S68) is also another potential beneficiary.
The Bonus Tip
Budget 2018 is, broadly speaking, a plan to future-proof Singapore and ensure our country remains relevant in the decades to come. From the Goods and Services Tax hike that will be implemented in the future to the unprecedented plans to fund complex projects, Singapore should be well-positioned to take on her future challenges.
If investors would like to ride on the growth of Singapore without taxing themselves in terms of having to monitor and study individual companies, they could look at investing in ETFs that track the Straits Times Index (SGX: ^STI) instead. There are two such ETFs, namely, the SPDR STI ETF (SGX: ES3) and the Nikko AM STI ETF (SGX: G3B). For a comparison of the two, you can head here.
Past performance is not indicative of future results but knowing the history can still help in our decision making. From its inception in April 2002 through to 9 January 2018, the SPDR STI ETF had produced a total return of 220%. Meanwhile, the Nikko AM STI ETF, which was listed in early-2009, had raked in a total return of 165.5% till 9 January this year.
A Foolish Bottomline
As I mentioned in my earlier article on Budget 2018, you should do your own due diligence before investing in any of the companies or ETFs mentioned in this piece. And, here’s to continued success for Singapore!
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Singapore Exchange Limited. Motley Fool Singapore contributor Sudhan P owns units in Lion-Phillip S-REIT and shares in Singapore Exchange Limited.