A $71 Billion Plunge Casts Doubt on Singapore’s New Economy Aura

(Bloomberg) -- Singapore's two largest new-economy firms have been touted as the next big thing for years. A $71 billion rout in their share prices in 2022 seems to show investors aren't buying the story.

Shares of ride-hailing company Grab Holdings Ltd. have more than halved since the start of the year while gaming and e-commerce giant Sea Ltd.'s stock price has tumbled by 46%. The two U.S.-listed firms are languishing at the bottom of the MSCI Asean Index, with Grab among the biggest losers on the Asia Pacific stock benchmark as well.

The slump comes months after MSCI Inc. added the shares to its indexes amid much fanfare as it sought to give its regional gauges more exposure to new economy stocks. The tech selloff and waning global interest in special purpose acquisition companies have taken a toll on the firms.

“Passive investors would have lost a fair bit of money on these stocks,” said Brian Freitas, an analyst who publishes research on independent research website Smartkarma. Future price action “depends on how the companies perform and the global macro environment -- neither of which look terribly encouraging at the moment.”

Grab was added to the MSCI Asean Index in February, hot on the heels of its merger with blank-check company Altimeter Growth Corp. Sea's inclusion in the gauge began in May last year. 

Freitas estimates that passive holdings of Sea and Grab are close to $2.8 billion and $280 million, respectively. The stocks have lost a combined $71 billion in market value this year.

Judging by the earnings outlook, there may be little respite in store. Sea, which counts Chinese social media leader Tencent Holdings Ltd. as its biggest shareholder, is betting on growth at its online retail unit Shopee as its gaming arm faces slower bookings. But, Sea shut its main e-commerce operation in India on March 29, soon after the country banned its marquee flagship game Free Fire along with dozens of apps it says are of Chinese origin, citing security concerns. 

“Shopee's growth trajectory is flattening rapidly alongside India and France exits,” said Oshadhi Kumarasiri, an equity analyst with LightStream Research. “For a company priced expensively based on its future growth, it's difficult to brush off the impact of an exit from a huge market like India. The growth story of Sea is falling apart.”

Meanwhile, Grab's losses are mounting and the firm continues to splurge on subsidies.

Still, analysts have been slow to cut target prices given the two companies' status as market leaders in Southeast Asia. They expect a return of at least 68% on both stocks over the next 12 months, according to data compiled by Bloomberg. 

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