SingTel's overseas strategy pays off

SINGAPORE Telecommunications (SingTel), the State-linked telecoms group, is the giant of the local market.

The Exchange's largest-cap stock and run by Lee Hsien Yang, son of the country's formidable founding father Lee Kuan Yew, it has been on a shopping spree in recent years to build up a portfolio of complementary overseas units.

That strategy was widely panned by analysts at first, who claimed that SingTel had overpaid in its eagerness to secure new assets, especially for Cable & Wireless Optus in Australia. But this year the company's shares have staged a sharp turnaround as integration has proceeded well and contributions from its non-Singapore businesses have increased.

From a low of S$1.20 in early January the stock reached S$1.74 last month. Analysts reckon that there could be more mediumterm upside, especially if SingTel assumes full control of its sprawling family of assets.

The shares backtracked mildly on Wednesday, easing one cent or 0.6% to S$1.65 as they were caught in the undertow of a weaker wider market blamed on declines in US stocks overnight.

SingTel now owns all of C&W Optus and commands stakes of between 19% and 35% in fast-growing telecom ventures in India, Indonesia, the Philippines and Thailand. This external wing accounts for two-thirds of total company revenues and it is regarded as a crucial avenue for future growth.

The international dimension is especially important for SingTel - and other local firms - which can be constrained by Singapore's modest size.

The rest of the market was subdued as some investors trimmed their positions in line with Wall Street's stumble. DBS Group, the largest financial group in Southeast Asia, slipped 10 cents or 0.8% to S$12.80, while family-run rival United Overseas Bank shed 10 cents or 0.7% to S$13.30.

The benchmark Straits Times index dipped 1.8 points or 0.1% to 1628. Among other blue-chips Singapore Airlines, rocked in recent sessions by rising perceptions of a threat from low-cost competitors, was level at $10.60.

Japan's stocks were caught between conflicting currents. On the one hand, both Wednesday's Tankan survey of business confidence was broadly positive, and the authorities had intervened to dampen the yen over the past 24 hours.

But the same survey revealed that businesses were hoping for an exchange rate of 118 yen per dollar until next March, a good deal weaker than today's rate of 111.

Some exporters did get a lift, however. Toyota was 40 yen or 1.2% better at 3320, and Matsushita Electric Industrial put on 25 yen or 1.9% to 1370.

Banks provided some strength on hopes of better earnings and fewer bad loans. Mizuho Financial rose 3000 yen or 1.2% to 253,000. The Nikkei 225 Average was 142.19 points firmer at 10,361.24.

Wall Street's shadow also fell over the South Korean market. Hyundai, the carmaker that wins 20% of total revenues from the US, softened 850 won or 1.7% to 32,250, while LG Electronics, which makes home appliances, fell 1600 won or 2.9% to 53,900. The Seoul Composite index retreated 2.15 points or 0.3% to 691.37.

Hong Kong's market was closed to mark China's National Day celebrations.