S'pore may pip China as Asia's fastest growing

Singapore may overtake China as Asia’s fastest-growing economy this year, increasing the attractiveness of the city state’s stocks and putting pressure on policy makers to check inflation with a stronger currency.

Gross domestic product of the Southeast Asian island will rise 10.8 per cent in 2010, according to the median of 13 estimates in a Bloomberg News survey before the July 14 second- quarter GDP report. By comparison, Goldman Sachs Group, BNP Paribas and Macquarie Group Ltd have cut estimates for China to at most 10.1 per cent in recent weeks.

An acceleration in pharmaceutical output and the opening of two casino resorts boosted growth in the first half, the result of Singapore’s efforts to diversify sources of expansion beyond electronics exports. The push to bolster services may sustain the economy and support investment that spurred the island’s benchmark stock index to outperform counterparts in China, Taiwan, Japan and Australia this year.

“Singapore has unique growth characteristics of its own as a function of having some new areas of growth,” said Manraj Sekhon, the London-based head of international equities at Henderson Global Investors Ltd, whose firm oversees about $94 billion in assets, including shares in Singapore companies.

Henderson has “meaningful positions” in Singapore-based companies such as Wilmar International Ltd, the world’s largest palm-oil trader, and Keppel Corp, the biggest maker of shallow- water rigs, he said. Its holdings of Singaporean stocks, also including CapitaLand Ltd and casino operator Genting Singapore Plc, are “close to the highest positions we’ve had,” he said.

Singapore’s benchmark stock index has climbed 28 per cent in the past year, more than Hong Kong’s Hang Seng and Taiwan’s Taiex, while the Shanghai benchmark has fallen 22 per cent. The Straits Times Index rose 0.3 per cent as of 9:45 am (local time).

Faster growth may prod the Monetary Authority of Singapore to do more at its next policy review in October, according to Kit Wei Zheng, an economist at Citigroup Inc in Singapore. Wage pressures are increasing and inflation may reach 5 per cent by the end of 2010, from 3.2 per cent in May, he said.