There has been a lot of talk about a looming recession in Singapore, 3rd quarter GDP was down to 0.6% from previous quarter of 2.0%. Things are pretty uncertain at the moment, should GDP contracts further, it could possibly trigger panic reactions in the economy.
So what does this mean for us as investors? Should we liquidate our positions and wait? Or should we diversify and focus on downside protection by buying recession proof businesses? In this article, I’ve compiled a list of sectors that you can look into to diversify your holdings:
Auto Inspection and Maintenance
People are less likely to buy a new car during a recession, they would prefer to maintain or renew existing vehicular ownership licenses as a cost saving alternative. An example will be VICOM, due to its monopoly in auto inspection services, VICOM will be less likely to be affected.
Healthcare Providers and Services
Specifically healthcare operators that owns hospitals and medical clinics, Singapore is well-known as being a leader in providing quality healthcare services in South East Asia and people all over the region visit our hospitals to seek high quality medical services. There are several healthcare operators listed in SGX, one of which is Raffles Medical Group who operates Hospital, Healthcare services and Investment Holdings.
Food and Staples Retailing
I would focus on businesses that owns large grocery chains or supermarkets, ideally they should be low-cost operators. In a tightening economy, people would rather shop at discount grocer or supermarkets. People tend to cut down on luxury spending for food and basic necessities. Sheng Siong Group operates supermarkets in Singapore and are known for supplying affordable range of groceries and consumer goods.
Postal and Logistics
SingPost operates postal, logistics and retail services Singapore and internationally. Its postal and logistics operations provides streams of stable cash flow for SingPost. This is vital in a contracting economy where companies with strong cash flows and balance sheets tend to survive tough economic conditions. However its retail and e-commerce division could suffer due to lack of consumer spending.
Disclaimer: This article is not a recommendation to buy or sell specific stocks or financial securities, information provided in this article are purely educational and for research purposes. Investing in stocks/shares or any other financial instrument carries significant risk, please seek advice of professional financial advisors or consultants before purchasing any form of investments.