July 13, 2020, 05:18 PM
The 2020 general election has concluded, and the People's Action Party (PAP) has returned to power with 83 out of 93 seats.
This brought a clear mandate to the PAP, which has been Singapore's ruling party since 1959.
The Workers' Party (WP) won the remaining 10 seats, securing two GRCs and its best electoral result to date.
So what does this mean for Singapore stocks? Well, it depends on who you ask.
More diverse voices in parliament may boost Singapore stocks
According to a Bloomberg report, the results of the election may boost Singapore stocks, after months of decline due to Covid-19.
Justin Tang, head of Asian research at United First Partners, claim that a more diverse Parliament in Singapore "mitigates any potential of group think", allowing for open and tough discussions to take place, which will in turn foster "even better policies".
He claims that such policies will ultimately flow down to firms, including government-linked companies.
Tang expects government-linked companies, such as Singapore Press Holdings and Singapore Airlines group, to become more nimble in the future, and to adopt new solutions and management styles, due to the diversity of voices in Parliament.
According to Prasenjit K. Basu, an economist and political strategist, Singapore being more "overtly democratic", with an increased number of opposition MPs, may also help the country cement its position as a strong financial hub in Asia.
STI traditionally trend lower if the PAP's votes fell
According to a DBS report released on July 13, the Straits Times Index (STI) may trend lower in the near future, due to the results of the general election.
The report stated that since 1991, the STI ended lower 30 days after polling day, whenever the incumbent PAP's votes fell.
It also stated that the impact of GE2020 is "no exception", due to uncertainty over Q2 results, and August being the seasonally weakest month of the year.
The STI faced a sharp dip in March 2020, due to the worsening of the global economy, amid the Covid-19 pandemic.
The index has been steadily rebounding since then, although it is still down around 18 per cent, compared to the start of the year.
Image via SGX.
Top image via Unsplash
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