The decline of the Straits Times Index (STI) in late January 2021, after briefly flirting around the 3,000 mark, is “not the beginning of the end,” say DBS Group Research analysts Yeo Kee Yan, Janice Chua and Chung Wei Le.
Instead, the analysts, led by Yeo, see the decline as a “healthy correction” instead of the beginning of a major downturn, with STI support at 2,880 and 2,790 points.
This is due to the continued recovery of Singapore’s manufacturing sector, as well as the falling rates of infection in the US and Europe.
The trend for the latter should continue as we approach warmer weather, note the team.
Furthermore, the rollout of Covid-19 vaccines have started globally and should pick up pace as supplies increase.
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As we are going into the FY2020 or 4QFY2020 results season, the analysts at DBS expect stellar performances from companies who have benefited from the Covid-19 pandemic, such as Sheng Siong, Riverstone Holdings and Medtecs International.
Other companies on the analysts’ radar are iFAST Corporation from strong assets under administration (AUA) growth, and AEM Holdings, which is a proxy to “ride on the strength of the semiconductor upcycle”.
The analysts have rated Sheng Siong, Riverstone Holdings, iFAST Corp and AEM at “buy” with target prices of $1.90, $1.85, $6.40 and $5.16, respectively.
“China Aviation Oil is dependent on key associate SPIA benefiting from domestic travel recovery. Hutchinson Port Holdings Trust (HPH Trust) is on track for a strong 2HFY2020 as throughput has picked up firmly since June 2020 on firm China exports,” notes the team.
On the other hand, the team also sees limited downside for SATS, Far East Hospitality Trust (FEHT), Ascott Residence Trust (ART) and CDL Hospitality Trust (CDLHT) despite the suspension of Singapore’s green lane arrangements with Malaysia, Germany and South Korea.
The analysts have rated China Aviation Oil, HPH Trust and SATS at “buy” with target prices of $1.38, 27 cents and $4.50 respectively.
The World Economic Forum that will be held in Singapore in May could be a “sentiment booster” for the local hospitality sector, adds the team.
To that end, the team says its preferred mergers and acquisitions (M&A) plays include Valuetronics, China Aviation Oil, Aims APAC REIT, and HPH Trust.
US REITs that will benefit from President Biden’s vaccination timeline that aims to inoculate 300 million Americans by September or October 2021, are Manulife US REIT, Prime US REIT and ARA US Hospitality REIT.
For CGS-CIMB Research analysts Lim Siew Khee and Jeremy Ng, they view the rise in markets early in 2021 as a “promising start”, with “data surprises on the upside”.
SEE: STI up 0.71% following better-than-expected FY2020 GDP growth
Singapore’s December 2020 non-oil domestic exports (NODX) came in at 6.8% expansion y-o-y compared to a 5% contraction y-o-y in November 2020, putting it above the brokerage’s and consensus’ expectations.
Singapore’s manufacturing sector ended the year with a 14.3% y-o-y growth, dipping slightly from November 2020’s growth of 18.7% y-o-y driven by electronics, chemicals and precision engineering.
Index outperformers for January were Wilmar, Thai Beverage and Hongkong Land while City Developments (CDL), Keppel Corporation and ComfortDelGro (CDG) underperformed.
“Since hitting the 3,000 psychological ceiling in early January, the failed attempts to break above the 3,000 resistance level has led to the current phase of correction,” say Lim and Ng.
“With the FSSTI falling back below the 20-day moving average, sentiment has also turned slightly bearish signalling further pressure to the downside in the coming weeks. Nevertheless, we expect the near-term support at 2,800 area to hold and turn the trend back into the bullish camp. For the next rebound, the FSSTI will likely be aiming for the 3,000 – 3,100 resistance again,” they add, as they maintain their FY2021 FSSTI target of 3,068 points based on a 14.2 times forward price-to-earnings (P/E).
As at 1.11pm, the STI is trading 19.50 points higher or 0.67% points up at 2,936.79.
