Economic Moats in Singapore

General Finances
By JingCheng Woo,

In What is an Economic Moat? (Part 1) we have identified the characteristics of companies with an economic moat.

In this article, we continue about economic moats in Singapore. Singapore is famous for her strict regulations and policies, while maintaining a market-oriented and open economy. Due to these unique circumstances, some industries in Singapore exhibit monopoly or oligopoly competition, where only one or a few companies in that industry have complete control of the market.

Examples of economic moats in Singapore:

SGX (SGX:S68)

Singapore Exchange Limited(SGX) is an example of a monopoly and could be the largest moat in this list.

SGX plays a dual role – being the player and also the referee.

SGX is the only stock exchange in Singapore, this essentially means that SGX has the ability to have constant earnings from settlement fees.

SGX is responsible for promoting the Stock Exchange of Singapore. SGX actively seeks to promote Singapore as a preferred choice among companies looking to get listed and raise funds from the capital market for expansion. In addition, SGX also plays the role of regulating the stock exchange; ensuring listed companies adhere to established rules and retail investors receive accurate and timely information.

Being a small country, the market exchange of Singapore Exchange is much smaller compared to other exchanges around the world. Therefore, it is more beneficial for Singapore to have just one stock exchange. New entrants to the industry are unlikely, and this advantage adds to the moat factor for SGX.

 

Genting Singapore PLC (SGX:G13)

It is no secret that the casino industry is highly lucrative. Singapore’s casino industry is heavily regulated and has only two main players (duopoly) – Resorts World Sentosa (RWS) and Marina Bay Sands Casino (MBS).

RWS is an integrated resort that is owned and operated by Genting Singapore PLC. The resort is strategically located at Sentosa, a main tourist destination of Singapore.

Sentosa welcomed 19.3 million guests in FY2016/2017. Since the start of 2010, RWS has attracted millions of visitors with the SEA Aquarium attracting more than 10 million and Universal Studios clocking more than 25 million visitors till date.

Therefore, RWS has an integral role and strong foothold in the Singapore Tourism industry and is supported by Singapore Tourism Board. With the stringent regulations in the casino industry and limited land space is Singapore, another introduction of a comparable player in the industry is highly unlikely. This naturally gives Genting Singapore an immense advantage and an economic moat.


Conclusion:

After exploring the various economic moats in Singapore and their competitive advantages in their respective industries.

Therefore, should we just all invest in economic moat?

In short – perhaps not yet. As an investor, we should always be critical and explore two sides of the coin. Economic moat also has its own flaws that investors need to know before diving in to invest in them.

Can you identify other economic moats in Singapore?

Join us in our next article, where we will explore the possible pitfalls of economic moats.

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Disclaimer: This article is not investment or financial advice. All examples listed are for educational purposes. Contents are reflective of personal views and readers are responsible for their own investments and judgements. Readers are advised to consider their own financial situations and perform their own independent due diligence.

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