Rising interest rates, and fears of a recession have wiped $110 billion from the market capitalization of Singapore’s two largest internet companies, leaving investors wondering how much worse things could get.
Sea Ltd., an E-commerce platform operator, saw its stock dive 78% this year, as Grab Holdings Ltd., a ride-sharing company, saw its stock price fall by more than half. Both listed in New York, the two companies are Singapore’s largest tech firms by market capitalization.
Amid much fanfare they were added to the MSCI Singapore Index, while tech stocks in the region were still riding high. However as interest rates have climbed, and the economy has slowed, investors have looked to a challenging year ahead and begun to ask if these companies will ever turn a profit.
The MSCI Singapore Index has been outperformed by the Straits Times Index, which does not include Grab and Sea, by roughly 20 percentage points this year. The MSCI Singapore Index’s underperformance was mostly attributable to the collapse in the price of Sea, with analysts such as Brian Freitas, an analyst who publishes on independent research website Smartkarma, predicting that stock would drive further dispersion between those two indices next year.
This year the MSCI Singapore Index is down 14%. Sea holds the fourth largest weighting on the index at 8.4%, while Grab is at roughly 2%. The Straits Times Index, which is focused more around old-economy sectors like banks and property, gained about 5%, by way of comparison.
Singapore-based tech companies have seen their outlook battered, as recessionary worries have triggered layoffs, business unit closures, and other cost cutting measures across the industry. While investors have grown uneasy, Freitas notes, the “recent cost cutting measures should help both companies weather any storms better.”
In an internal memo last week, Sea founder Forrest Li announced the company would freeze most staff salaries, and cut bonuses this year, as the economic outlook grew darker for 2023. Grab also announced its own cost cutting measures in a staff memo, among them a hiring and salary freeze, according to a Reuters report earlier this month.
