Someone asked me about my views on the Singapore equity market. So I decided to calculate the implied market expectation of the FTSE STI so that one can decide for himself whether to hold on to his position or otherwise.
The FTSE STI dividend yield as on 31 December 2010 is 2.91%. The real GDP growth for Singapore for the past 20 years is 6.5% on average. This has been coming down as Singapore becomes more developed. Moreover, with the likely shift in focus from GDP growth to other intangible focus as demanded by the recent election results, I do not think 6.5% is sustainable. I will revise down the long-term real GDP growth to 3% for this calculation purpose.
As on 31 December 2010, the FTSE STI index was at 3190.04. Using the Gordon model, the real return implied by the FTSE STI is 2....
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