Singapore companies’ indebtedness has swelled to the most in Asia after China and India as the city- state’s economic growth slows, according to GMT Research Ltd.

Leverage among the Southeast Asian nation’s corporates is following counterparts in the two larger economies to a level considered a “danger threshold,” Gillem Tulloch, founder of the Hong Kong-based researcher, said in an interview on Tuesday.

Debt rose to six times the amount of operating cash flow in 2013 for non-financial Singaporean companies, from 5.1 times in 2012, a report by GMT Research shows.

“It’s a bit surprising that Singaporean companies seem to have leveraged up significantly over the past few years,” said Tulloch, 43, a former analyst at CLSA Asia-Pacific Markets. “There’s been a slight loss of discipline, or it could be that the growth has not come in as expected.”

Singapore’s government said last month its export-led economy will experience “modest” expansion in 2014 amid a labor-market crunch. It’s likely that growth is headed for a slowdown, since it can’t be sustained without more stimulus or reckless bank lending, GMT Research said.

The leverage ratio in China rose to 7.5 times from 6.8 times last year, while the measure in India grew to 8.1 times from 7 times, the May 28 report showed.

‘Growth Scare’

Singaporean bonds have gained 2.9 percent this year in U.S. dollar terms, less than the 4.4 percent returns for the broader market in Asia, indexes compiled by HSBC Holdings Plc show. The country’s stocks have outperformed the region’s benchmark index, according to MSCI indexes.

Tulloch said equity investors should hold fewer Singaporean, Chinese and Indian shares than the benchmarks they track. He doesn’t have any recommendations for the bond markets.

Companies’ debt to cash flow ratios signal that investment for business expansion in Singapore may be waning, GMT Research said. Enterprises with high ratios of leverage and cash outflows include those in the consumer discretionary, energy and materials sectors, Tulloch said in his report.

“There is a high potential for a growth scare there,” he said. “Singaporean companies, from my experience, are quite well run. You would expect them to pare back capital expenditure in 2014 to restore their balance sheets.”

A corporate-sector bubble starts when free cash outflows exceed 50 percent of net profit for several years, Tulloch said.

Singapore’s companies suffered 37 cents of cash outflows for every $1 of net profit earned in 2013 as they spent 40 percent more in capital expenditure, according to the report. That compared with 12 cents of inflows the previous year. The 2013 outflows for China and India were 51 cents and 93 cents.

GMT Research tracks some 9,000 Asian companies or about 50 percent of all listed companies in the region ranked by descending sales. Tulloch formed GMT Research in December 2013 after leaving Forensic Asia Ltd., a research consultancy set up by former CLSA economist Jim Walker.