Should I buy blue chip stocks in Singapore? Beansprout's guide to Singapore blue chip stocks

TL;DR

• Blue chip stocks in Singapore are companies listed on the Singapore stock exchange that are well established and seen to be financially sound.
• Investors may choose to buy into these Singapore blue chip stocks as they are perceived to carry lower risk compared to smaller companies.
• Blue chips stocks in Singapore that did well in 2021 include Singapore Press Holdings, DBS, UOB and Yangzijiang Shipbuilding.
• In 2022, some of the Singapore blue chip stocks to add to your watch list include Sembcorp Industries, SATS and City Developments.

What are Singapore blue chip stocks?

As an investor in the stock market, one would often come across new terms that may not sound immediately familiar.

One of the terms often used in the Singapore stock market is blue chip stocks. 

You might be wondering what does this truly mean? What would I be investing in when I buy into Singapore blue chip stocks? 

Fret not, as this is something that Beansprout did not understand when we started on our investing journey as well. 

But having asked around, it became clear that the term “blue chip” came from the game of poker, where it is seen as the chip that is most valued. 

Likewise in the stock market, blue chip stocks in Singapore refer to well-established companies that seen to be financially sound. 

These are often the largest companies listed in Singapore with the highest market capitalisation. 

In other words, investors perceive these companies to be relatively safe as they have a strong market position and are well known in the public. 

This brings us to the next point about why an investor should consider investing in Singapore blue chip stocks. 

Why should I look at Singapore blue chip stocks?

As we shared in our article “What you need to know about how to invest in Singapore”, it is important to have an investment plan before you start. 

After all, some of us may like to take risks, while others may prefer investing in stocks that are less volatile. 

Here’s Singapore blue chip stocks are seen as being relatively stable due to their sheer size. 

This doesn’t mean that they are not subjected to market downturns and share price weakness. 

It’s just that compared to a smaller-sized firm operating in the same industry, they are generally seen to be less risky. 

This might make blue chip stocks in Singapore suitable for those who do not want their portfolios to be subjected to too much movements. 

As many of these companies have established business models and cash flow generative operations, they may also pay attractive dividends to investors.  

Hence, they can be considered for investors looking to build a passive income stream to fund their retirement.

Lastly, we have been constantly reminding investors that there is a need to diversify your portfolios to make sure that we do not have overly high exposure to any single stock or sector.

If your portfolio is currently predominantly in the US market, or even crypto, then investing in Singapore blue chip stocks might be one of the ways that you would be able to diversify your portfolio.  

Which were the best performing Singapore blue chip stocks in 2021?

One of the ways we can narrow down the list of Singapore blue chip stocks, is to look at the Straits Times Index (STI). 

The STI is an index that tracks the performance of the top 30 companies listed on the Singapore exchange (SGX). 

Looking back, the STI generated a total return in Singapore dollar terms of 13.6% in 2021, outperforming the Hang Seng Index that fell by 10.6%. 

It is worth noting that the Singapore banks performed exceptionally well last year, with the average total return generated by DBS, OCBC and UOB at 25.2%. This exceeded the return generated by the STI. 

This was driven by the strong economic growth that we saw as Singapore emerged from the Covid-19 pandemic. 

Singapore’s GDP grew by 7.6% in 2021, and banks were seen to be benefiting from the increase in economic activity with more lending activity, and higher fee income from advising companies and high net worth clients on transactions. 

Outside of the banks, the standout performer was Singapore Press Holdings, which saw a total return of 112% in 2021. Yes, the share price more than doubled in the past year. 

This came through after an announced restructuring of the company, where its entire media-related business was transferred to a newly formed not-for-profit entity. 

Its share price got a further boost, when conglomerate Keppel Corp and the Cuscaden Peak consortium led by tycoon Ong Beng Seng got into a bidding war to acquire for the remaining assets of SPH. 

Lastly, another blue chip stock that saw exceptionally strong performance last year was Yangzijiang Shipbuilding, which generated a total return of 45%. 

The Chinese shipbuilder secured a record high level of new shipbuilding orders amounting to US$7.41 billion in the past year. 

This led the company to have an outstanding order book of US$8.5 billion as of December 2021, ensuring that its yard capacity would be fully occupied for the next few years. 

In addition, the company also announced its plans to spin off its investment segment into a separate listing on the Singapore Exchange.

Management of Yangzijiang believes that this will help them to strengthen their corporate governance and focus on building its competitive its strengths in shipbuilding following the spin-off.

Which are the Singapore blue chip stocks I should add to my watchlist in 2022?

The STI has continued to do well so far this year, with a total return of 9.6% in the first quarter of 2022. 

This made the STI the best performing index in Asia Pacific, with its gains in sharp contrast to the losses seen on the S&P 500 index and Hang Seng Index. 

If you are interested in finding out about blue chip stocks in Singapore at this point, these are some of the names that you can add to your watchlist. 

Sembcorp Industries (SGX: U96)

Looking for a stock to own that plays into the structural theme of decarbonisation and shift towards renewable energy?

Then Sembcorp Industries might be one of the blue chip stocks in Singapore to keep a lookout for. 

Sembcorp Industries may be a familiar name to many of us in Singapore. Our electricity may be purchased from their energy retailing business, or we might have seen their waste collection trucks around our neighbourhood.

What many may not know is that the company has been actively building its portfolio of renewable energy assets in a move to support the global energy transition. 

This would comprise wind, solar, and energy storage in key markets such as Singapore, Vietnam, China, India and the UK. 

It currently has a gross renewable capacity of more than 5.7GW, and has a target to increase this to 10GW by 2025. 

As one of the few companies with exposure to the green energy transition, Sembcorp Industries has done well so far this year. It was the top performer in the STI in the first quarter of 2022, with a total return of 34%. 

SATS (SGX: S58)

SATS provides services linked to Singapore’s travel industry, including baggage handling at Changi Airport, as well as food catering for flights. 

In the last fiscal year, SATS generated 88% of its revenue from Singapore. Close to 55% of revenue came through from aviation-related services.  

SATS‘ revenue is directly linked to the flight traffic into and out of Singapore. Unfortunately, this was impacted with the COVID-19 pandemic as total visitor arrivals into Singapore fell to just 330,000 in 2021, a fraction of the 19.1 million visitors that came in 2019. 

Encouragingly, monthly tourist arrivals have improved to 92,800 visitors in December 2021 as vaccinated travel lanes were introduced, and could rise further with the announced relaxation of travel restrictions.

As such, SATS is a blue chip stock in Singapore that could benefit from the relaxation of travel restrictions.  

Find out which are the other stocks that could benefit here.

City Developments (SGX: C09)

A discussion on blue chip stocks in Singapore would not be complete without mentioning a property stock. 

After all, Singaporeans love their property investments, and follow the latest developments to be launched and dividend payout of their REIT holdings closely. 

City Developments, controlled by billionaire Kwek Leng Beng, may be a familiar name to many as one of the largest real estate developers in Singapore.

Last year, City Developments sold 2,185 residential units valued at S$4.3 billion, the highest-ever annual property sales achieved by the company. 

Some of the hot sellers include Irwell Hill Residences near Orchard Road and CanningHill Piers close to the Central Business District. It also has plans to launch Piccadilly Grand soon.

Apart from residential property development, City Developments also own office buildings such as Republic Plaza, and hospitality assets through its Millennium & Copthorne Hotels subsidiary. 

More recently, the company has announced a special dividend in specie of units in CDL Hospitality Trusts to its shareholders. 

How can I buy Singapore blue chip stocks?

As Singapore blue chip stocks are generally more liquid than companies with a smaller market capitalisation, they are also fairly accessible to most investors. 

Retail investors would be able to invest in these companies through a stock brokerage account. Not sure how to get access to one? Check out our article “How to start investing in Singapore”