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Singapore Budget 2022: 5 Investment Themes to Watch

Budget 2022
Budget 2022

Singapore budget 2022 has been revealed and all eyes were on the expected GST hike.

We got our answer last Friday.

The current GST will be raised from the current 7% to 8% on 1 January 2023 and then to 9% on 1 January 2024.

Finance Minister Lawrence Wong delivered his first budget statement, with the theme of “charting our new way forward together”.

In essence, this Budget was designed to help Singapore to move on from the past two years and to prepare itself for a brighter future.

At the same time, the government also recognised the need for a “fairer and more inclusive society” where no one is left behind.

The Budget, therefore, delivered a good mix of measures that will boost revenue (through increased taxes) for future healthcare spending, and at the same time, blunt the impact of taxes through targeted assistance to vulnerable and low-income families.

Here are five important highlights you should take note of and how they may impact your investments.

1. An increase in carbon taxes

The government is pushing forward on its ESG goals.

It has mandated an increase in carbon taxes from the current S$25 per tonne for companies that emit at least 25,000 tonnes of greenhouse gases annually.

The tax will increase to S$45 per tonne in 2026 and 2027, before reaching S$50 to S$80 per tonne by 2030.

Businesses that fall under this category can, however, purchase high-quality, international carbon credits to offset up to 5% of their emissions from 2024 onwards.

This announcement should create demand for carbon credits and provide a boost to regulated carbon markets such as Climate Impact X.

Climate Impact X was set up by DBS Group (SGX: D05), Singapore Exchange Limited (SGX: S68), Standard Chartered Bank, and Temasek Holdings to provide organisations with high-quality carbon credits.

2, Targeted assistance for recovering industries

Targeted assistance will be extended for the aviation sector as it continues to recover.

These include measures to ensure public health and safety at airports and also preserve the industry’s core competence, all in the name of preserving Singapore’s status as an aviation hub.

The Temporary Bridging Loan Programme and enhanced Trade Loan Scheme will also be extended, with revised parameters, by another six months from 1 April to 30 September.

These moves should benefit Singapore Airlines Limited (SGX: C6L) and SATS Ltd (SGX: S58).

3. Building infrastructure for electric vehicles

Singapore is set to continue to progress on its goal to be a car-lite society.

To this end, the Budget spoke about accelerating the adoption of electric vehicles (EV) by building more charging points in residential areas around the island.

Around S$35 billion of green bonds will be issued by 2030 to fund such infrastructure projects.

Electric car sales grew by 17-fold last year to 1,740 units, making up 3.8% of new car registrations.

Tesla (NASDAQ: TSLA) dominated the EV market by selling 924 units, more than half of the total EVs sold in 2021.

Vehicle-inspection business VICOM Ltd (SGX: WJP) will need to pivot towards inspecting EVs as the government has an ambitious goal of phasing out all internal combustion engine vehicles by 2040.

4. Setting sights on a 6G future

Singapore intends to upgrade its broadband infrastructure to increase access speeds by around 10 times over the next few years.

With 5G already active around the island, the government will invest in the next-generation 6G technology to tap the connectivity wave.

Lawrence Wong mentioned possible new use cases for augmented and virtual reality, in a nod to the current interest in the metaverse, a virtual world where people can meet and interact.

The metaverse is currently being worked on by internet giants such as Meta Platforms (NASDAQ: FB), Microsoft (NASDAQ: MSFT) and Alphabet (NASDAQ: GOOGL).

The upcoming upgrade of broadband infrastructure and investment in future technologies will also affect telcos such as Singtel (SGX: Z74) and StarHub (SGX: CC3).,

Increased connectivity will be a boon for NetLink NBN Trust’s (SGX: CJLU) non-building address points.

Meanwhile, the Infocomm Media Development Authority’s Advanced Digital Solutions initiativewill be expanded from 1 April to include solutions that leverage artificial intelligence and cloud technologies.

The initiative was launched in 2020 to help businesses adopt advanced integrated solutions such as robotics.

The increase in digital literacy will boost demand for data centres and benefit REITs such as Keppel DC REIT (SGX: AJBU), Mapletree Industrial Trust (SGX: ME8U), Digital Core REIT (SGX: DCRU) and Ascendas REIT (SGX: A17U).

5. Property tax increases

Property tax will increase in two steps from 2023, with rates for non-owner-occupied residential properties going up from between 10% and 20% currently to between 12% and36% by 2024.

This move should dampen investment property demand and may impact companies such as PropNex Ltd (SGX: OYY) and APAC Realty Ltd (SGX: CLN).

At the same time, property developers such as City Developments Limited (SGX: C09), Frasers Property Limited (SGX: TQ5) and CapitaLand Investment Limited (SGX: 9CI) may also witness lower demand for residential investment properties in Singapore.

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Disclaimer: Royston Yang owns shares of DBS Group, Singapore Exchange Limited, Meta Platforms, Alphabet, VICOM, NetLink NBN Trust, Keppel DC REIT, Mapletree Industrial Trust and Digital Core REIT.

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