DBS Group Research analysts Yeo Kee Yan and Foo Fang Boon have identified seven Singapore Exchange (SGX)-listed stocks to ride out the market swings that may happen in the next two months.
Factors contributing to the sideways volatility are the concerns over China’s slowdown and the sustainability of the current economic resilience of the US. The high-frequency economic data from the US that’s driving reactions to the US interest rate outlook and whether the US Federal Reserve will be able to engineer a soft-landing are also other factors.
With this in mind, Yeo and Foo like UMS, ComfortDelGro (CDG), Digital Core REIT and Thai Beverage (ThaiBev) as they see an improving outlook for the 2HFY2023 for these counters.
In their view, UMS will benefit from their key customer AMAT’s higher-than-expected guidance and recent contract wins and renewals. CDG is likely to see recovery in their public transport, taxi, and private hire segments, as well as their businesses in the UK and China. Digital Core REIT is likely to see a resolution over its Cyxtera assets and leases while ThaiBev will see clarity with the removal of the political overhang in Thailand, stronger tourism arrivals and private consumption.
Meanwhile, the analysts are optimistic over the prospects of UOL, Keppel REIT (KREIT), which they believe to be oversold at present. UOL may see improvements from the recovering optimism for its hospitality division while KREIT may see a rebound in trade as the timeline for Keppel Corporation’s dividend-in-specie of KREIT shares progresses
Finally, the analysts like Singapore Technologies Engineering (ST Engineering) for its industry’s resilience and robust orderbook. The group has an order backlog of $27.7 billion and an earnings compound annual growth rate (CAGR) of 12% over FY2022 to FY2024.
See also: Test debug host entity
REIT picks
Within their report dated Sept 4, the analysts also like Mapletree Logistics Trust (MLT), CapitaLand Ascendas REIT (CLAR), Frasers Centrepoint Trust (FCT), Digital Core REIT and Daiwa House Logistics Trust (DHLT).
These REITs were selected for their manageable and, or moderate debt profile such as their interest coverage ratio (ICR) and gearing ratio, which should “feature favourably in this higher-for-longer rate environment”.
See also: Maybank downgrades ComfortDelGro in contrarian call over Addison Lee acquisition worries
Tourism counters to benefit from upcoming events
Stocks that are likely to benefit from Singapore’s tourism initiatives in the 3QFY2023 are CDL Hospitality Trusts (CDLHT), Far East Hospitality Trust (FEHT) and Genting Singapore (GENS) with the strong visitor arrivals and revenue per available room (RevPAR) figures for July possibly extending into August as well as the Formula One (F1) Singapore Grand Prix that’s happening from Sept 15 to 17.
“Furthermore, with the counts for August at the Sumatra hotspots being just a small fraction of what was seen in the haze years of 2019 and 2015, inbound tourism stocks can continue business as usual if 2023 turns out to be a low/no-haze year, which would help cushion the seasonal lull period post F1 till November,” the analysts note.
STI rangebound
The benchmark Straits Times Index (STI) is also likely to be rangebound within 3,150 – 3,270 points amid the sideways volatility from the factors mentioned above.
Looking ahead, DBS’s economists note that rates would hold steady at 5.5% till 1H2024. The estimate comes ahead of the Federal Open Market Committee (FOMC) that will be taking place on Sept 21.
As at 4.40pm, the STI is trading 10.58 points lower or 0.33% down at 3,228.39 points.
