JS-SEZ Emerges: Discover Top Singapore Stocks Making Waves

On January 7th, during his visit to Malaysia, Singapore's Prime Minister, Lawrence Wong, together with the Malaysian Prime Minister, Anwar Ibrahim, formally signed an agreement to establish a special economic zone between the two countries. This economic zone leverages Singapore’s global financial and logistical prowess, alongside Johor's land, labor, and energy resources, to create a supply chain distinct from North Asia.

Under the agreement, both parties aim to foster and promote the expansion of 100 projects over the next decade, potentially creating 20,000 job opportunities.

Thilan Wickramasinghe, the Head of Research at Maybank Securities, noted in a report that the Johor-Singapore Economic Zone (JS-SEZ) focuses on enhancing cross-border connectivity, facilitating smoother movement of people and goods, and strengthening business ties between the two regions. Consequently, Singapore stocks aligning with four main themes are likely to benefit: reducing operational costs and labor shortages, shifting supply chains, accelerating the transition to net-zero emissions, and expanding infrastructure and real estate investments.

Analysts highlight that as supply chains move to the JS-SEZ, increased financing needs could drive growth in bank loans. Singapore's three major banks—DBS Group, OCBC, and UOB—have extensive wholesale and retail banking operations in Malaysia and ASEAN. Following the signing of the JS-SEZ agreement, the stock prices of these banks reached all-time highs at the close of trading that day, with DBS at a price-to-book ratio of 1.92, followed by OCBC at 1.41 and UOB at 1.30.

Promoting renewable energy projects is also a focal point of the economic zone, with industrial stocks like Sembcorp Industries likely to benefit. Additionally, Singtel is collaborating with Malaysian telecoms to build data centers in Johor. An increase in demand for land and submarine cable infrastructure connecting the two countries could prove advantageous for Singtel.

Technology manufacturers such as AEM Holdings, Frencken Group, UMS Holdings, and Venture, which already have facilities in Malaysia, might choose to expand their production in the economic zone to benefit from lower corporate taxes and reduced labor costs.

Philip Securities Research Head mentioned that Thomson Medical Group, which possesses substantial land holdings in Johor and plans to build a hospital there, is among the medical stocks most likely to benefit from the economic zone. The Thomson Iskandar Medical Hub is expected to be completed by 2030, located in the central waterfront area of Johor Bahru.

Both Macquarie Capital and JP Morgan agree that Singapore bank stocks are winners in the JS-SEZ, but they also note that the zone is more advantageous for Malaysian listed companies. According to the agreement, the JS-SEZ covers an area of 3500 square kilometers, including Iskandar Malaysia and Kelantan, approximately four times the size of Singapore.