A Good Time to Buy the Dip?

Welcome to Thoughts on the Market. I’m Nick Lord, Morgan Stanley’s Head of ASEAN Research.

Today – Singapore is about to celebrate its 60^th year of independence. And it’s about to enter its most transformative decade yet.

It’s Monday, the 28th of July, at 2 PM in Singapore.

Singapore isn’t just marking a significant birthday on August 9th. It’s entering a new era of wealth creation that could nearly double household assets in just five years. That’s right—we’re projecting household net assets in the city state will grow from $2.3 trillion today to $4 trillion by 2030.

So, what’s driving this next chapter?

Well, Singapore is evolving from a safe harbor for global capital into a strategic engine of innovation and influence driven by three major forces. First, the country’s growing role as a global hub. Second, its early and aggressive adoption of new technologies. And last but not least, a bold set of reforms aimed at revitalizing its equity markets.

Together, these pillars are setting the stage for broad-based wealth creation—and investors are taking notice.

Singapore is home to just 6 million people, but it’s already the fourth-richest country in the world on a per capita basis. And it's not stopping there.

By 2030, we expect the average household net worth to rise from $1.6 million to an impressive $2.5 million. Assets under management should jump from $4 trillion to $7 trillion. And the MSCI Singapore Index could gain 10 percent annually, potentially doubling in value over the next five years. Return on equity for Singaporean companies is also set to rise—from 12 percent to 14 percent—thanks to productivity gains, market reforms, and stronger shareholder returns.

But let me come back to this first pillar of Singapore’s growth story. Its ambition to become a hub of hubs. It’s already a major player in finance, trade, and transportation, Singapore is now doubling down on its strengths.

In commodities, it handles 20 percent of the world’s energy and metals trading—and it could become a future hub for LNG and carbon trading. Elsewhere, in financial services, Singapore’s also the third largest cross-border wealth booking centre, and the third-largest FX trading hub globally. Tourism is also a key piece of the puzzle, contributing about 4 percent to GDP. The country continues to invest in world-class infrastructure, events, and attractions keeping the visitors—and their dollars—coming.

As for technology – the second key pillar of growth – Singapore is going all in. It’s becoming a regional hub for data and AI, with Malaysia and Japan also in the mix. Together, these countries are expected to attract the lion’s share of the $100 billion in Asia’s data center and GenAI investments this decade.

Worth noting – Singapore is already a top-10 AI market globally, with over 1,000 startups, 80 research facilities, and 150 R&D teams. It’s also a regional leader in autonomous vehicles, with 13 AVs currently approved for public road trials. And robots are already working at Singapore’s Changi Airport.

Finally, despite its economic strength, Singapore’s stock market had long been seen as sleepy — dominated by a few big banks and real estate firms. But that’s changing fast and becoming the third pillar of Singapore’s remarkable growth story.

This year, the government rolled out a sweeping set of reforms to breathe new life into the market. That includes tax incentives, regulatory streamlining, and a $4 billion capital injection from the Monetary Authority of Singapore to boost liquidity—especially for small- and mid-cap stocks.

We also expect that there will be a push to get listed companies more engaged with shareholders, encouraging them to communicate their business plans and value propositions more clearly. The goal here is to raise

Singapore’s price-to-book ratio from 1.7x to 2.3x—putting it on a par with higher-rated markets like Taiwan and Australia.

So, what does all this mean for investors?

Well, Singapore is not just celebrating its past—it’s building its future. With smart policy, bold innovation, and a clear vision, it’s positioning itself as one of the most dynamic and investable markets in the world.

Thanks for listening. If you enjoy the show, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.

Andrew Sheets: Welcome to Thoughts on the Market. I'm Andrew Sheets, Head of Corporate Credit Research at Morgan Stanley.

Today – how the world may fund $3 trillion of expected spending on AI.

It's Friday July 25th at 2pm in London.

Whether you factor it in or not, AI is rapidly becoming a regular part of our daily lives. Checking the weather before you step out of the house. Using your smartphone to navigate to your next destination, with real time traffic updates. Writing that last minute wedding speech. An app that reminds you to take your medication or maybe reminds you to power off your device.

All of these capabilities require enormous physical infrastructure, from chips to data centers, to the electricity to power it all. And however large AI is seen so far, we really haven't seen anything yet. Over the next five years, we think that global data center capacity increases by a factor of six times. The cost of this spending is set to be extraordinary. $3 trillion by the end of 2028 on just the data centers and their hardware alone.

Where will all this money come from?

In a recent deep dive report published last week, a number of teams within Morgan Stanley Research attempted to answer just that. First, large cap technology companies, which are also commonly called the hyperscalers. Well, they are large and profitable. We think they may fund half of the spending out of their own cash flows.

But that leaves the other half to come from outside sources. And we think that credit markets – corporate bonds, securitized credit, asset-backed finance markets – they're gonna have a large role to play, given the enormous sums involved.

For corporate bonds, the asset class closest to my heart, we estimate an additional $200 billion of issuance to fund these endeavors. Technology companies do currently borrow less than other sectors relative to their cash flow, and so we're starting from a relatively good place if you want to be borrowing more – given that they're a small part of the current bond market. While technology is over 30 percent of the S&P 500 Equity Index, it's just 10 percent of the Investment Grade Bond Index.

Indeed, a relevant question might be why these companies don't end up borrowing more through corporate bonds, given this relatively good starting position.

Well, some of this we think is capacity. The largest non-financial issuers of bonds today have at most $80 to $90 billion of bonds outstanding. And so as good as these big tech businesses are, asking investors to make them the largest part of the bond market effectively overnight is going to be difficult.

Some of our thinking is also driven by corporate finance. We are still in the early stages of this AI build out where the risks are the highest. And so, rather than take these risks on their own balance sheet, we think many tech companies may prefer partnerships that cost a bit more but provide a lot more flexibility. One such partnership that you'll likely to hear a lot more about is Asset Backed Finance or ABF. We see major growth in this area, and we think it may ultimately provide roughly $800 billion of the required funding.

The stakes of this AI build out are high. It's not hyperbole to say that many large tech companies see this race to develop AI technology as non-negotiable. The cost of simply competing in this race, let alone winning it – could be enormous. The positive side of this whole story is that we're in the early innings of one of the next great runs of productive capital investment, something that credit markets have helped fund for hundreds of years.

The risks, as can often be the case with large spending, is that more is built than needed; that technology does change, or that more mundane issues like there not being enough electricity change the economics of the endeavor.

AI will be a theme set to dominate the investment debate for years to come. Credit may not be the main vector of the story. But it's certainly a critical part of it.

Thank you as always, for your time. If you find Thoughts on the Market useful, let us know by leaving a review wherever you listen. And also tell a friend or colleague about us today.